Reuters reports that Zambia, Africa’s top copper producer, plans to tighten its grip on the government’s share of profits made at the country’s mines, boosting tax revenue and ensuring a more level playing field for Chinese and other investors.
Investors in miners operating in Zambia, which include Glencore, Indian miner Vedanta and Canadian-listed First Quantum, have fretted over possible increases in taxes under a government elected last year, against the backdrop of a surge of resource nationalism across Africa.
But Vice-President Guy Scott said there were no plans to change the tax code, and that making sure mining companies complied with the existing rules would boost income.
“We are very happy with the formula at the moment. We are not arguing about the taxation formula … That’s not where the concern is. The concern is compliance,” he said, speaking at an event hosted by Thomson Reuters on Friday.
“There are all these countries that are known as offshore banking or financial services centres. They get their money from somewhere, and we suspect some of it may be coming from Zambia,” said Scott, one of the highest-ranking white officials in sub-Saharan Africa.
[pullquote]Sticking to the current tax regime was a “firm promise”, he said. “We have backed off a windfall tax which at one stage was brought in … We have a higher royalty, and a progressive profits tax and the interest is not to change the formula but … to enforce compliance,” he said.[/pullquote]
Sticking to the current tax regime was a “firm promise”, he said. “We have backed off a windfall tax which at one stage was brought in … We have a higher royalty, and a progressive profits tax and the interest is not to change the formula but … to enforce compliance,” he said.
The new Zambian government is trying to juggle the competing priorities of unions demanding better pay for mineworkers with demands for more stable conditions from mining firms.
Scott said the government would look at under-reporting and possible transfer mispricing by mining companies, but said there was an issue with raising tax-collecting capacity.
“You get between 45 and 50 percent of the profit in tax. If you get it, there is no problem,” he said in an interview later.
LEVEL PLAYING FIELD
Ensuring they collect their share of mining profits is a huge concern for resource-rich African countries like Zambia.
Many countries and pressure groups fear abuse of transfer pricing rules – governing how companies sell goods between subsidiaries – means they are losing billions of dollars to tax havens.
Transfer mispricing happens when a company’s unit in Zambia, for example, sells goods to a second unit at a cut-down price to ensure it records most profits in a low-tax jurisdiction.
[pullquote]“In some senses, this is a kind of Fitch correction visit … We get down-rated or up-rated according to maybe what some 25-year-old thinks is the case from various gossip that he’s heard in Zambia, and I’m here to correct it,” he said.[/pullquote]
Scott said Chinese miners, with whom relations have not always been smooth, would be treated like anyone else but would no longer get the favoured treatment he said they had enjoyed under the previous administration.
President Michael Sata has toned down his past accusations that Chinese companies, which have sunk $2 billion into Zambia to secure a share of its mineral wealth, had created slave labour conditions in Zambia with scant regard for safety.
“We don’t give them any leeway in terms of ‘You’re special, we want you, you don’t have to pay tax or you don’t have to comply with the labour laws’,” Scott said about Chinese firms.
“They have great interest in our natural resources … We are not frightened they are going to turn around and go. They are obviously not. So they need to be treated on an equal basis,” he said.
Scott said he expected the Zambian economy to grow by eight percent this year, after 6.6 percent growth in 2011, and inflation to stay around its current level of 6.5 percent. “If it increases a bit, I don’t see what the problem is,” he said.
Scott said his aim in coming to London was to convince investors that “we do speak your language” but he took aim at rating agency Fitch over its decision in March to revise Zambia’s outlook to negative.
“In some senses, this is a kind of Fitch correction visit … We get down-rated or up-rated according to maybe what some 25-year-old thinks is the case from various gossip that he’s heard in Zambia, and I’m here to correct it,” he said.
[Reuters]
Jerabo tax?
You need a life woman
Ka Nubian Princess who should stop your nonsense and your cheeky comments, don’t comment if you have nothing to say if your fat fingers are itchy just scratch yourself.
Nubian Princess my foot!!
Ka Nubian Princess you should stop your nonsense and your cheeky comments, don’t comment if you have nothing to say if your fat fingers are itchy just scratch yourself.
Nubian Princess my foot!!
Keep it up my veep!
Well articulated and very insightfull.continue workin hard
In your campaigns you demonised the previous regime for dropping the windfall tax and promised to restore it once voted into office. The Chinese infestors as you famously/infamously refered to them have continued to exploit our people with impunity (Visit the renowned coal mine in Maamba). I know for sure that the change we wanted can not be realised within the few months you have been in office but we want to see well defined and definate policy direction. I might be wrong but so far, I think you have just continued from where MMD left off. Good luck.
You Chaps like Nubiana suffer from syphillis of the brain, bent on just insulting all the time.
Just by looking at the face of the guy seated at the right side of guy scott,do you think the donor can you money? it looks suspicious
HAPPY BIRTHDAY SUPER KEN. YOU WERE A HUMBLE DICTATOR.
Well chosen words from right person to make these meetings. So this was just a Fitch-rating damage control visit.
We now want to see Zambia flying completely on a PF drawn budget. The current one has bits attached to previous regime.
thanks God he never allowed the guy seated to the right to talk…
Uli chipuba iwe ka. Can’t you read the caption on the picture? It is a “FILE!” photo—geese!
to the left rather …… where is the printed K3 trillion?
@ 5 and 8 that is a file photo, but that article the Doc was speaking in London I think yesterday, I read this article earlier somewhere, nevertheless you have made me laugh what is life without humour?! GOD BLESS ZAMBIA.
Happy Birthday KK you may have been a dictator (one party participatory democracy!!!) but we have something to learn from you teba ‘ala b” bena! GOD BLESS ZAMBIA
Rating, investment attraction, and tax harvens, are all based on what people perceive the nation. Perception is generated by the political mood; unfortunately for Zambia, these politicians (in government and in opposition) do not know the help or damanage their WORDS can have on the prosperity of a country. To illustrate, Obama’s words on BP after the gulf of Mexico oil spill disaster almost sunk BP as a company because no one could perceive BP as a viable company to offer services or products when it was in the thick of the crisis. Meaning, Sata, HH, Baroste, Chiefs, VP, to mention but a few, have a huge impact just by what they say. Their words determine the risk score on investment decisions and the speed with which returns on investment is demanded.
#11; continued. The result is that for every 1$ investment made in Zambia, the cost to Zambians is probably 10 fold; just so that an investor can recoup their money as quickly as possible; because they are scared things may turn for the worst. CHALLENGE IS; WHO WILL LISTEN TO THIS MESSAGE, We will wait for Jesus to come; he may inculcate this in you people that think fighting and bickering over wealth you will not even finish in 6000 years is a good thing. Its a message to you all tuma politicians from a technical expert on these things who you would otherwise treat as a Kaponya in your own country.
I love Scott, Chikwanda and Lubinda. These are useful brains. Sad that the Veep and Finance are old. But they are definately intelligent! Ka Lubinda can even rule ma guys. What do you think?
This is easily the most articulate govt official I have heard from our country, especially on the matters pertinent to the development of our country. This is what education gives you – you speak with authority because you know stuff, not just flipping around with useless spontaneous outbursts. Keep it up my man, very proud of you!
Damage control. Well said Veep. The investors need to know that there are no major economic departures. So consistency is there.
I was home,the Great East flyover bridge is cracking soon it will fall, the Chilenje Zamefu and Kabwata flats are cracking and falling to pieces,the farmers are claiming they had a low deal in the slain pigs during the Swine outbreak,miners in Chingola and Luanshya are not happy due to missing rail line slippers. We need a S Zulu led Commission of Inquiry. I will submit 10 pages material. Who was behind all this?
Fitch correction visit! My foot! A 3day visit to London will not change how investors perceive Zambia and your govt. My advice to you is to shut your loose mouths. You’ve made statements that have made people wonder as to the direction of the country both politically and economically. Be truthful about the direction of the country or you will continue to be regarded as risky.
Failed PF govt! SHAME ON UKWA!!!!!!!!!!!
Continue your negativity. The earth is rotating and also revolving around the sun.
Shallow talk, no in-depth into how he will make the investors comply with current policies. [-(
Sorry to rain on your parade negative people but the investors are coming. You may not think Zed has anything to offer you but other people living in foreign lands see our country as one of the ones to do business with. There will be the usual mix of rotters who ‘play nice’, well meaning infrastructure, agricultural, mining etc and development bods. Take part, watch from a distance, support, jeer… that is your personal choice. Just don’t pretend what you have to ‘say’ makes a damn difference to the plight of Zed. Do something with those skills or live your life where you are but bitterness is choking some of you so perhaps all is not well where you are and all you want is what is best for Zed. Teach me why and how by showing me, says tomorrow’s child.
True dat!
Very good A Phiri!!
Very good point, it’s not government’s job to soothe conflicted people :-)
Compliance of the profit variable tax regime is crucial for Zambia to collect the correct taxes from mining companies
The mining companies currently carry out self declarations and compute tax according to THEIR declarations! It is not unreasonable to assume that if profit is slightly above the trigger point for variable tax to kick in to a higher tax rate, the figures will be “revised” downward so that the profit is below the trigger level
Building capacity at ZRA and rigorous physical audits of all the big and potentially big mines is absolutely essential to stop the tax dodgers!! This is governments responsibility.
Very few bloggers can comment intelligently on topics like this one. Why?
because there is no loop hole for insults
Bwana VP – the 25 yr-old bases his calculations on sound economic and mathematical models that the developed world uses. These are institutions that can downgrade even the world’s economic superpower. You cannot just dismiss that. Damage control without sound economic plans in place will not take you anywhere.
Hey you numbskulls, so what do you expect the govt to do? The fact is Fitch was overzealous. How come Standard and Poors gave a different story? When govt changes, some shock due to governance adjustments must be expected. You want govt to keep quiet? Paranoid rants you are.
I think based on their campaign language these will have to carry out a dozen damage control trips,but not their chief ukwa, cos he might do damage uncontrol, maybe just this very first white veep in africa,will try to convince them folks!
What is this albino monkey on about? MMD policies being implemented by monkeys with no idea about economics. No imagination and creativity. Where is the change we voted for?
What is this albino kolwe on about? MMD policies being implemented by kolwes with no idea about economics. No imagination and creativity. Where is the change we voted for?
The 25 year old and his peers have made more money that you and your kolwe govt will be able to steal from Zambians in the next 5 years .
“We have backed off a windfall tax … We have a higher royalty, and a progressive profits tax and the interest is not to change the formula but … to enforce compliance,” he said. Those were MMD policies on the basis of which PF won elections. And PF has backed off on almost all the fundamental promises to the electorate, so is Guy Scott now admitting that PF lied its way to power? Meantime, he cannot even acknowledge the above MMD formula on mine taxation that PF has clearly embraced, not even a reference to the “previous government” as he usually does when he wants to criticise.
Google: getting our pound of flesh guy scott
Guy Scott, Feb 2, 2011, in The Post, on why Zambia should have a Windfall Tax and the variable profits tax is not collectable:
“One of the attractions of the windfall tax to many commentators is its apparent objectivity. You take the amount of copper produced, multiply by the LME price in excess of the various “trigger points”, and alleluia, you have Zambia’s share of the action. By contrast, the system currently in force is heavily dependent upon taxing computed profits, and many people suspect that profits are less than objective. There is too much fudge-factor: non-transparent “hedging”; losses carried forward; so-called corporate responsibility expenditure; these and those allowances; transfer pricing; negotiated exemptions.
(Continued:)
” Let me emphasise that, viewed purely as a mathematical formula, the present tax regime, if applied objectively, would yield about the same revenue as was targeted by the windfall tax (i.e. 40 per cent plus of genuine profit).
So there is no real argument about targets. It is *the ability and will of the Zambian authorities to collect all of it* – i.e. to hit the objective level – that is of concern to those of us who know our country.
And after all, if countries that enjoy the advantages of sophisticated administrative machinery such as the UK can suffer from corporate evasion of profits tax, then how can we to be sure we can collect all that is due to us? “
Bitter MMD. You lost. That is a fact! Windfall tax is one small issue understood by just a clique of people in town. Why do you think your grandmother in Pambashe in Kawambwa voted you out? A million reasons bangwele!
Windfall tax is a big issue that is understood by a small clique of educated people. Your uneducated country people voted MMD out. Infact these tuma negative bloggers are the UP n Downs. What was their reason for doing so? There are a million other reasons okey! The veep has done a good job and govt is not ending there. Embassies have that task too. Grow up!