The International Monetary Fund (IMF) on Tuesday urged Zambia, Africa’s top copper producer, to increase mine taxes to fund roads and hospitals, even after the country scrapped a contoversial windfall tax on mining earnings.
Copper is the main export for this southern African country, accounting for over 63 percent of the country’s foreign earnings, and the IMF wants Zambia to raise more revenue to improve public finances and fight poverty.
The IMF has previously said that although Zambia weathered the global downturn last year, government revenue collections have fallen short of expectations.
“Enhanced tax collections, including from the mining sector will be critical for providing space for increase capital and social spending,” said George Tsibouris, head of an IMF staff mission that visited Zambia from February 17 to March 2.
Copper prices have recovered from four-year lows recorded early last year, boosted by demand from China, the world’s largest consumer. Three-month copper futures on the London Metal Exchange are trading around $7,416 a tonne.
With the backing of the World Bank, Zambia imposed a 25 percent mining windfall tax in April 2008, along with a 15 percent profit variable tax to raise revenue, which was to be invested in infrastructure, particularly in poor rural areas.
Lusaka also raised its mineral royalty to 3.0 percent from 0.6 percent and corporate tax to 30 percent from 25 percent.
But the government lifted the windfall tax in January after some foreign investors threatened to take legal action, accusing authorities of breaching agreements they signed with the mining companies that promised lower taxes.
The government says the windfall tax was scrapped to boost foreign investment in mining, and would not be re-introduced.
Last month, Zambia said it plans to further review the Mines and Minerals Act this year to reduce the cost of doing business and make the mining sector even more attractive to investors.
Copper output in Zambia rose 14 percent to 697,860 tonnes last year, and Zambia has previously said copper production could hit 1.0 million tonnes by 2011 as new mines come on stream and expansions and upgrades take place at existing facilities.
Zambia has forecast its economy could grow as much as 7 percent this year and 8 percent in 2011 due on recovering copper exports and booms in construction and manufacturing.
This forecasts put the country of 13 million among the world’s fastest growing economies, and underscores the extent to which countries on the poorest continent — particularly mineral exporters — succeeded in weathering the global economic storm.
[Reuters ]
So the Zambian government was right to remove the windfall tax on mines! The IMF is never right on any issues of monetary policy in the developing world. Indeed this organisation has never done any thing to show for its existence. All the countries that it helps go from bad to worse until they ditch it.
If the Zambia government was running its mines there wouldn’t have been all these issues. Look at them now, failing to claim what is rightfully fearing that if they do so the investors will pull out of Zambia. This is what you get for being so damn low in thinking. Step down you fulls, make room for wise mind ba fikalar
:d The IMF flipflops more than pata patas.
Its not Rocket science. The gov’t should increase mine taxes and stop depending on handouts.
America, UK and even China are doing what they must to survive. So why should we be shy? If the investors want to go, let them go, better investors are waiting if they live…..Up Mining Taxes
They should introduce windfall tax. Do not forget copper is finite. We need the windfall tax to divert to tourism and agriculture. We need to empower the locals and begging ain’t the solution. If investors don’t want to pay windfalltax let them to go. What is the use of people getting your minerals in the name of foreign investors…and Zambians remain poor. Do you want to be like Nigeria whereby they have oil but a majority of people suffer? Use wisdom… please be proud of Zambia. Windfall tax is a fair tax . Some of these investors do not care about Zambia, they do not want Zambians to progress. Give them a finger they take the whole arm.
Just who is fooling who? why is the govt scared of taxing the mines? outrightly rejectng a revenue? it smells corruption and someone ll answer oneday
Truly I feel all your comments but the question begging for an answer is: WHOSE HAND ARE OILY from this episode:-?
Musokotwane is a big disappointment,he worked for BOZ and was at some time attached to IMF,sure he cant see that Zambia is losing out on revenue from the Mines by arrogantly insisting that the windfall tax abolishment will attract investment in the sector.PULIZ%-(%-(%-(%-(%-(
and this doesnt mean that after increasing the taxes you should increase your salaries and bonuses too. Did it honestly had to take IMF to think for GRZ:o. I will always say this “Zambia is not a poor country”:o
WE TOLD YOU SO! FOOLISH MMD. What do you expect from chaps who were bottom of the class?:-b:-b:-b:-b
Lets try and be objective. The taxes were reduced because of the fact that the copper price had fallen. This means that it would have been un-profitable for the mines to operate and would have closed shop which would have been worse as more people would have lost their jobs. The wind-fall tax is just that, it is supposed to increase govt revenue when the copper price reaches a certain level. What is interesting is the fact that PF did not support the govt when they introduced the tax, but did not support the govt when they got rid of it. So where exactly do they stand on this matter? As for govt taking over, lets not forget that productivity was very low under ZCCM and the mines were actulally losing money and costing the govt a lot of revenue just to keep them going.
#11, that is the political side of the explaination…..windfall taxes were self adjusting, meaning that you only pay when the price of copper hits a certain mark (can’t remember exact figure) but the gist of the issue was that the price arrived at meant that it adequately covered all costs of production and left the mining houses with a healthy profit even before they pay anything via this tax. This tax was meant to draw income for the govt from excess profits resulting from the abnormal market prices of copper, hence the term “windfall”. Enlightened ministers like Maxwell Mwale, Situmbeko Musokotwane and Felix Mutati are all letting their country down by politicking on this issue when we should be decisive and firm when it comes to benefitting from our resources.
# 11, TAX is charged on profits. the more profit you make the more tax you should pay. So even with low copper prices, mines can still still pay taxes as they are not fixed amounts. Windfall taxes are supposed to be based on excess profits. The MMD chaps are just too dull to think. We are being lead by people who were bottom of their classes and thats unacceptable.
Uwakwisano well explained. We need chaps like you in GRZ.
# 11,in simple terms the windfall tax is like a floater in a water tank, the more water in your tank above a certain threshold the more you pay.
RB’s govt made a grave error by removing the windfall tax which was backed by teh IMF and World bank. LPM was strong enough to face the mine owners. RB is weak. There was absolutely no justification to removbe the windfall tax.
Firstly, windfall means just that. the tax only kicked in when copper prices were very high. In recession, prices went down, so there was no unproportionate tax govt demanded from the mines.
Secondly, instead of abolishing it “to prevent foreigners abandoning teh mines” in the recession, they should have only suspended it so that when copper prices picked up, like now, the tax should have been brough back. It was a mistake to say the windfall tax will not come back.
RB is a big let down in this case. He was spineless in this matter.
Thoise talking about normal corporation tax should know that many companies dont want to pay tax. they do whatever creative accounting they can come up with to explain why they should not pay tax. They make sure that they declare the smallest taxable profit. This is what is happening in Zambia. Dont ever hope to get much tax from these mines. The best is the windfall tax.
I can assure you no mine owner will flee Zambia. Copper is on high demand.
If IMF and World Bank are telling you to tax teh mines more, if you dont do it would imply there’s corruption somewhere. This would be selling Zambia and is unforgivable.
This is where opposition parties should put pressure on govt to explain exactly what is going on with our copper. Sata, HH, Chipimo, plz rise to the challenge.
Sata has been in opposition while all these mines are being sold. I think he has failed Zambia to provide a good run of checks and balances on the govt.
Being in opposition is not just seeking to be in govt. It is to provide alternative solutions and thought on the governance of our country. Unfortunately we seem to have heard more insults than thoughtful articulation of issues. This is where we miss Mazoka. HH is a clown. He is educated but he has not lived upto what he is capable of. Hopefully Chipimo will give us hope.
MMD has messed up with the mines. We need someone to challenge these guys on this issue. Parliament is full of Yes-bwanas. Civil society has been less than effective. Opposition is not effective. Govt has got away with blue murder.
Begging and loans for things like roads is not the solution when windfall tax could have been used. Does any blogger know the statistics of copper revenue gained in profit since 2008-2010? The revenue of workers employed by mines between 2008-2010? What kind of tax is being used now by MMD since they scrapped LM windfalltax? How much potential revenue was lost by switching the tax system?
Ba ? 11 you’re lame in thinking. The mines were to pay the tax ratio-wise, which means they were suppose to pay in accordance to the excess profit they make. 12 to 17 and 19 double thumbs up
do foreign investors pay tax? if so, how much?