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It’s foolish to postpone taxation of the mines — Mphande
13 October 2010 Wednesday 05:46 AM Views: 1765 times
Finance minister Dr Situmbeko Musokotwane

University of Zambia (UNZA) economics lecturer Dr Mathias Mphande has said it is foolish for government to postpone the development of the country by not properly taxing the mining industry.

Commenting on finance minister Dr Situmbeko Musokotwane’s declaration to Reuters that reduced donor support towards the 2011 budget will not derail its implementation because government expected more revenue from mine taxes, Dr Mphande said the minister was only daydreaming.

Dr Musokotwane made the pronouncement despite his own announcement at a press briefing last Saturday that government had no intention of re-introducing the 25 per cent mining windfall tax because that could force some mining companies to close.

Dr Mphande said no country behaves the way Zambia was behaving, observing that even DR Congo that was more chaotic than Zambia taxed its mining industry better.

“Other than incompetence, they—[government]—just don’t know the importance of taxation to development and in relation to poverty-reduction, that’s all. They really don’t care for Zambia, they care for their Chinese, Indians and foreign investors—they don’t like Zambians. They are not working in the interest of the country for sure,” Dr Mphande said.

“But you put it on record, that is why our country is not going to develop, it cannot develop on internal resources, our only internal resource is valuable and proper taxation of the mining industry, without proper taxation of mining companies, this country cannot develop and that is why it is not developing.”

Dr Mphande said the mining industry was doing well in the country, stating that reports of increase in copper production was real but lamented that Zambians did not benefit from the development.

He said the increase in production was not as a result of MMD efforts but as a result of decisions that were made by people like him (Dr Mphande) in the 90s, that the mines be wisely privatised.

“So it is just foolish for this government to postpone development for our country by the unjust taxation system; whether its windfall tax or royalties, what is important is that what we are collecting from the mining industry is not fair for the country,” Mphande noted.

He said government was lying when it declared that there would be development in the country because there were not enough resources to develop the country in the absence of donor aid or competent taxation of the mining industry.

“Let me tell you for the record, the Zambia revenue collection system is about 20 per cent of GDP from taxes. The mining industry, which is over and above the whole total economy, is contributing nothing. So it’s just the over-taxation of poor Zambians through VAT, through levy on water, electricity which is creating little resources and that is not sufficient to develop this country,” he said.

He said the taxes that government was collecting from the mines were only sufficient to invest in the trips of politicians, their salaries, gratuities and benefits at their end of office.

“The country is not going to develop and let’s put it on record, the donor community is upset and they are very unsympathetic with a corrupt country which cannot raise money from its country and think that they have to pay for it.

They are not going to give money to Zambia because we are capable of developing from our own resources if everybody is taxed fairly, why should the Zambian people sacrifice, pay for electricity and roads and the people who are using that electricity and road which are the mining companies because they are the only economy that don’t pay for that, it is out of this world,” he said.

Dr Mphande dismissed the minister’s fears that mines would close if government re-introduced windfall tax.

He said the windfall tax is the only tax that the Zambia Revenue Authority (ZRA) would manage to collect without difficulties.

“The others they won’t collect, they won’t even know what is happening, cobalt is being exported as copper concentrates, they are not capable of supervising such a sophisticated industry but with windfall tax they would know what to do. It is easy to collect, it’s transparent, it’s efficient and who is the owner of the windfall profit is the owner of the resource?” he wondered.

Dr Mphande said there were no meaningful projects that government was undertaking because there was no money.

He said government was mishandling the country’s mining taxation and there was nobody else in the world that would let people make money in their country and go scot-free, saying that was not fair.

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