Former President Rupiah Banda says re-introducing windfall tax has potential to scare away investors in the mining industry.
Mr Banda indicated that implications of introducing the windfall tax are huge on the nation and may result in the loss of jobs in the mining industry.
He was speaking today when he officiated at the launch of the project on the increased accountability and dialogue on political party manifesto development in Zambia by FODEP.
He said it is unfair for Zambians to think that foreign investors can continue investing in Zambia when they are over taxed.
Meanwhile, First Quantum Minerals (FQM) says meaningful dialogue should take place in order to find a solution that balances investor interest and that of Zambians as the debate on windfall tax rages on.
First Quantum Minerals (FQM) Head of Tax, Adam Little said that the tax rate would surpass 100 percent and force mine owners to shut down operations if windfall tax was brought back.
“Overall tax rate if windfall tax was brought back will be 122 percent. You will never find any country charging taxes at that rate.
“Windfall tax is not the answer. The way to get at the answer is through meaningful consultation between all stakeholders,” he said.
Mr Little explained in a statement that windfall tax would attract 122 percent if the price of copper was above $3.50 per lb, 97 percent if the price was between $3.00 – $3.50 and 72 percent if it was between $2.50 – $3.00.
“Think of that. I make $100 of profit, I have to pay $122 of tax! The only thing I can do when that happens is stop production and shut the mine.
“For the high cost mines that aren’t so profitable, the tax rates would even be higher,” he said.
FQM’s Kansanshi Mine, co-owns with government (FQM – 80 percent and GRZ – 20 percent), pays a total of 42 percent in taxes under the current mining tax laws in Zambia.
Why do we always think investor’s are doing us a favor ? Let them go if they do not want to abide to our demand’s … Thank God Banda is out
Sata is still in. He has also said No Windfall Tax. His uncle Chikwanda even called those who are calling for windfall tax mad!
The real reason I am opposed to the tax is because I will not be getting my cut if these mining companies are taxed. I know a few select individuals in government who have been bought by the mining companies to champion the doing away with of windfall tax.
It is simply the “nichekeleko” culture – nothing to do with taxes here.
I think its right for the government to implement this windfall tax so that the Zambian people can also benefit directly from the sudden increases of profits from a sudden rise in copper prices. All the western governments implement windfall taxes once in a while to help balance the books and raise much needed cash for debt servicing and project execution.
If the mine operators are worried about the windfall tax rate then they should negotiate a reasonable rate of around 50%. I don’t see any reason why the mining companies should complain when such tax is levied only in times of windfall profits once in a while due a sudden rise in copper prices.
Government should not buy too much into such black mail by foreign investors. They should always prioritise the needs of the poor people.
Unfortunately, I suspect a rot some where if the government is unwilling to collect the windfall tax. Some one is getting huge bribes for advocating to let these companies off the hook. Naturally it would be in the companies ‘s favour to bribe a few Jims and Jacks in government with a few millions than pay billions to the government tax man.
If the PF is scared of becoming unpopular over the windfall tax they should instead enact a law to make sure that in times of windfall profits the companies should be mandated to pay at least bonuses at 25% of monthly pay to lower paid workers and then collect part of that money income tax. This is a clever way of doing because it would be a win win situation for both the PF and the workers.
PF reject my advise at your own peril.
There will always be investors. When some go away, others will come. Remember Anglo-American Corporation and Binani? The goodness is, when they leave our natural resources remain behind with us solet them go!!!!
Don’t just back, when you don’t have even a spade to mine the copper yourself. Name which Zambian companies with resources to mine yr copper. Government has even failed to run a single mine.
these mining companies really know how blackmail our leaders. they have now started thinking that RB will come back to power and support their cause. sometimes i praise his Excellency the president of the republic of zambia on the way he responds to these con-men. they want to deplete our minerals without giving us our good share all in the name of FDI
its not blackmail my brother. our leaders are corrupt. one case of RB obtaining $500Pin on an oil deal that is not sealed. RB should be among the richest in the world
@Silozi (sic), I can see you’re still hearing voices! $500m ! Man take your medicines!
But has your man introduced the windfall tax? His uncle is calling Zambians advocating for WIndfall tax lunatics. RB introduced variable tax which saw more investment in mines and green field mines coming up.
@ Tukuluho, I think you have collected smoke instead of fire from Silozi’s contribution. Read it again. Silozi quotes the figure $500Pin ($500,000). The $500m is your own figure which does not appear in Silozi’s contribution.
ka HH what’s your say now that your friend RB is against windfall and you’re for windfall, back fast we hear
Your PF has also said No to windfall tax!
you are an .***** of a blogger should learn to respect other bloggers’ views even if they are not in line with your .stupid political ideology
This is just half of what RB said. He was very clear that he wasn’t against windfall tax but that we needed to be sober in how we introduced. He clarified that the way it was introduced last time was not conducive for economic growth. The headline should have been “RB Says Lets be Careful on How We Introduce Windfall Tax.”
What Zambians think is indeed out of this world, if an investor is made to make losses due to windfall tax, would it make sense to you to continue investing in such an environment? Investors are not charitable organisations so they need to make profit!!! Without that there would no need to invest!!!
RB is a man who knows his economics 101. Thats how he built for us the record forex reserves before these clueless villagers ruined everything with mpikanomics
a windfall tax is a tax levied by governments against certain industries when economic conditions allow those industries to experience above-average profits. Windfall taxes are primarily levied on the companies in the targeted industry that have benefited the most from the economic windfall, most often commodity-based businesses.
As with all tax initiatives instituted by governments, there is always a divide between those who are for and those who are against the tax. The benefits of a windfall tax include proceeds being directly used by governments to bolster funding for social programs. However, those against windfall taxes claim that they reduce companies’ initiatives to seek out profits. They also believe that profits should be reinvested
copy paste?
@Bwalya Chiselema
So what?
Bring back wind fall tax. PF dont get advice from RB
Have any of you read the bottom of the article? FQM’s effective tax is already 42%, that is substantially higher than the corporate tax of 35% for ordinary companies, as well as high income earners under PAYE. Further it is substantially higher than the 10% for agricultural companies. Why is the tax rate so low for agriculture? Simple answer is the government is seeking to encourage agricultural development, meaning the tax rate is sensible. Given that Zambia is a mining country an effective tax rate of 42% is already high enough. The reality is that Zambia is collecting lower taxes than it should not because of the mines but because of informal traders and business people who are not taxed by the government. Every one needs to pay their fair share.
We failed to run the mines when we had ownership. You even introduced giving amatebela to mothers . So stop this windfall fall tax talk. We are not the only copper producing country
Hilarious! ZCCM messed up, they bought practically everything for the families of their employees. Now serious people are running mines you are here complaining
it is logical
that rotten cro.ok was paid and bought for by the foreign mining companies
Fellow Zambians let’s learn to research on a matter and understand it deeper before supporting or condeming.
It’s clear that most of the bloggers who advocate fall this windfall tax do not even understand it’s nature and economic consequences.
AN EMPTY TIN MAKES LOUDER NOISE
PF came to power through populist policies such as re- introduction of windfall tax on mineral commodities such as base metals. To u- turn on such policies is digging their political grave. Please let those who have done Economic history degrees understand the exact meaning of Windfall Tax. It is important miopic ministers avoid insulting knowlegeable Zambians. The so called financial ministers must be advised about its implications.
Mining companies pay huge taxes its just our governments plunder taxes.
Its not how much you collect its how you manage what you collect.
….I totally do not agree with those against windfall tax…..at times you don’t need ‘a round table arrangement’ to come up with certain economic decisions. if the government tried to negotiate with employees or indeed the unions on PAYE, employees will be paying less than 5%. The so called Mr. Little should not belittle us with his example… $100 profit nonsense….his argument is childish. In fact his argument exposes the rot going on. If our govt technocrats/economic negotiators can buy such crap, then as a country we are doomed and done
And the best way is first reduce size of cabinet, and go on to reduce the ministers and MPs basic earnings.PF politics are no longer a service to the nation, this is simply people coming together in the name of a political party to plunder the national resources.NO one amongst these thugs appear to have a heart for the people, the issue is just the belly.
Very sad that a past president can comment on such a sensitive matter of policy. As a former head of state, it is expected that he keeps quiet and let those who are running now, continue with their purposed policy implementation, if he has something to say, let him call Sata and talk on phone. RB is not an opposition leader, but former politically inactive head of state. To issue such statement whose difference to current government is based on policy is immature, childish and ‘un-statesman’ of him. Policy difference are differences based on leadership style and management system being employed, RB should be familiar with that, unless he is still getting heavily drunk and losing his memory. With love RB, be respectful even just to yourself man
Windfall tax introduced by Levy was excessive but RB was too quick to ban it instead of negotiating it downwards. He is not the right person to oppose the tax because he is simply returning favours by represent mining companies. Through his son, there was some deal with a foreign mining company director on some partnership over Kashime deposit in Mkushi & was asking for 40% free carry from developers. Such Crazy greed he never got a developer who would give away 40% just for being a presidos son. Corrupt & Compromised whilst in state house and still compromised in retirement.
A bwezani mulityani? Kaya, kuli bwanji ku farm?
Amazing how Mr. Little deliberately want to scare Zambians from sharing in their own wealth. The trigger price for windfall tax is above US$2.50/lb. Assuming the price of copper on LME is US$2.90/lb. Ceteris paribus other taxes and costs, windfall tax to be collected for the Zambian people will be US$2.90 – US$2.50, gives us base figure of US$0.40/lb which will be taxed at 25% and GRZ would get US$0.10/lb while First Quantum Minerals would still benefit US$0.30/lb. Same calculation is applicable for the other 2 windfall bands. I’ve simplified to show that Little is making excuses for his company to exclusively enjoy from increases in world price of copper. The PF GRZ needs technocrats to have this policy implemented. Mines were threatening us over the 6% mineral royalties, where are…
Last sentence retyped:- The PF GRZ needs technocrats to have this policy implemented. Mines were threatening us over the 6% mineral royalties, where are they? Here and minting huge profits, I can assure you!
viva micheal sata.windfall tax is the way forward.this minors have extracted copper in the last tens years and made a profit of $29b,meanwhile zccm was sold for only $600.the norwegians under levy mwanawasa brought in experts to advise the govt on introducing windfall tax which was going to enable zambia make about $5b per annum and boost our gdp.the investors suspended operations and during the same period levy died mysteriousy in egypt.banda came in and continued with pay as you earn.can some pliz watch stealing africa and good copper bad copper on yotube to understand whats going on in zambia?
That tax accountant is lying thats not LPM said the windfall tax would be.The windfall tax is charged on the excess profit a company makes. Which means their actual profit is not taxed. The pay mineral royalites which are very low. 0.6% on the windfall say the copper is calculated at $3500 and as an example the profit is this copper is 1500 which means $2000 is the capital.Then instead the prices of copper have sky-rocket due to mining boom.So the copper price goes to $7500 out of this amount is the initial investment and profit, Which is 7500-3500=4000 this answer is the excess profit and so the windfall tax will be charged on the extra which is a percentage in the $4000 e.g $500 the company still remain with their $1500+3500=$5000 profit. government 0.6% royalty money +the windfall($500)
Let him also explain how they externalise and hide profits with transfer pricing and other tricks otherwise we would have been quite haapy with the current tax rates
can some one explain windfall tax proper.becouse these business figures of 100%,122% u ra telling as we can not undersand them proper.
you are forgeting transpotation and others,lets rethink.