Reuters reported that legislators and other economic players in Zambia said the introduction of the windfall tax should be reintroduced as it will not affect profitability of mining operations but enable the people to benefit from the profits in the industry.
At the height of unprecedented increase in copper prices which reached approximately USD 9,000 per tone towards 2007, Zambia introduced the windfall tax to capture the abnormal profits of USD 415 million per annum from copper mining companies, a move which riled several mining companies, although it was supported by Zambians.
The mining fiscal regime, introduced on April 1st 2007 by late Mr Levy Mwanawasa administration, aimed to rake about USD 415 million from the mining and copper sector in 2008 alone. It was, however, abolished this year and replaced it with variable profit tax, prompting several economic players to argue that the decision by the government to amend the law was because of pressure from some mining companies that threatened to withhold investment.
The recent earlier than expected recovery in global metal prices following a recession, which has seen copper prices move from USD 2,000 per tonne in December 2007 to the current USD 56,500 per tonne, there have been, renewed calls from stakeholders for the reintroduction of the windfall tax.
A number of people that appeared before the Parliamentary committee on estimates of expenditure recently for the 2010 budget, to be effected in December this year, said with the current variable profit tax, Zambia would not be able to benefit from the high international copper prices induced by increased global metal demand.
The report stated that the payment of windfall tax would, not in anyway affect the profitability of the mining operations but merely serve to enable the Zambian government to share in the super normal profits to be reaped from high commodity prices by the copper sector.
The committee on estimates opposed the proposed increase of duty on diesel to 30% in the 2010 budget from 10% currently when the country was grappling with the effects of the economic financial crisis.
Following the abolishment of the windfall tax and introduction of the variable profit tax, the agency wanted to audit the mines as a way of verifying their tax books of accounts as well as raising the capacity of the country's revenue income.
The pilot audit of the mining companies which started in February 2009 with the help of Norway was expected to end next month after the government amended the mining regime of 2008.
Between January and September 2009 period, mining company taxes based on provision payments were below target by ZMK 13.2 billion having recorded an outturn of ZMK 212.1 billion against a target of ZMK 225.3 billion.
(Sourced from www.reuters.com)
