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Wednesday, 4 July 2012

A Cry for Fair Taxes

Over the last month we have seen increasing pressure on Government to increase tax revenues. Here are two recent examples of pressure :
“While mining companies have been making huge profits, the local communities have suffered increased impoverishment due to mining activities which have negatively affected the livelihood of our people"

"We cannot call for windfall tax because Government has ruled out this tax but there is need for continued debate so that the country can come up with other ways of getting more taxes from the mines without killing the goose that lays the eggs".

It appears that we may be winning the argument again. We won it in 2008 when President Mwanawasa accepted the argument to raise the taxes - that year saw the Mines and Minerals Development Act 2008. I am sensing another victory may be our hands. 

The Daily Mail Editorial shift is particularly important. Unfortunately their support though welcome could have been phrased. It seems strange to reject a particular tax just because Government disagrees with it. Surely it is their job to argue why such a tax is better. 

Anyway, as we have argued in the past - it is not about the windfall tax per se - it is about increasing the benefit to Zambians across board. We need comprehensive mining reform, including revenue sharing mechanisms. The argument has always been that enforcement is linked to the type of tax regime. So it is not so much that higher taxes are more fair - but that higher effective taxation systems are more fair. In other words, we can lower the taxes - as long as we move to more revenue based approach with a windfall element, which results in higher taxes. Another area we need to explore is the need for more Government involvement in the exploration side of things - so that rents can be auctioned, not just given away as at present. Greater direct production through ZCCM-IH should be accelerated.  

Simply put - the Government should publish a Green Paper on Mining Policy. We keep calling for this - let us have a full consultation. Invite people to submit thoughts and ideas. We need a national policy not a PF policy - as we have called for here

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