14 January 2009
Caritas Zambia’s Position on Mining Taxes
The call by the Mining Companies and Chambers of Mines to revise the new tax regimes is unwarranted. This is because mining in Zambia, at the moment is the largest contributor of revenue to government. It accounts for more than 70 percent of Zambia’s export earnings and therefore any reduction in taxes will result in failure by government to provide social services, such as education, food security, health and infrastructure, which are key to national development.
The proposal by Mining Companies and the Chambers of Mines that; variable tax be scrapped from 15 percent profit to zero, mineral royalty rate be graduated according to the copper prices, corporate tax be cut to 25 percent from 30 percent and also that government suspends 25 percent excise duty on diesel and to waive road levy on diesel imported for the mines, raises a lot of questions. One such important question would be on what guarantees the mines would give government and the people of Zambia that their reduced production cost will lead to their profitability and remain operational.
While noting the arguments that the Mining Companies and the Chambers of mines are making regarding this issue based on the reduced copper prices on the international market, Caritas Zambia calls upon government to resist being forced into making decisions that impede on sustainable development. A starting point in these discussions however is the realisation that minerals are a non renewable resource. In considering this proposal therefore, the government should uphold the principal of sustainable development in all its dimension that is, decisions made now should not negatively impact the future generation. Failure to protect our minerals and demand payments for extractions will not only disadvantage many poor Zambians who require quality social service delivery but will seriously disadvantage our future generations and deny them of any revenue from the mineral resources. The ongoing discussions or disagreements should not only focus on apportioning costs and benefits among current stakeholders, but also on how "costs" and "benefits" are to be conceived in relation to the future generation. There is no incentive in hastily depleting all minerals resources after all, they are not perishable.
Caritas Zambia has over the last few weeks followed with keen interest the suggestions which are being proposed by various mining companies in the wake of the unfolding financial crisis in our economy. It is for this reason we suggest the following measures:
The government
Caritas Zambia wish to urge the Zambian government to dialogue with the mining companies in the quest of finding a lasting solution to the current impasse. The government together with the mining companies should find areas were meaningful cost saving can be made which would not affect the workers. We note that retrenching workers will have far reaching consequences both to the workers and the economy. We are aware that most of the employees of these mining companies are bread winners and retrenching them would be a contradiction to the spirit and letter of poverty reduction in the country.
We further wish to urge the government to seriously find ways of diversifying the economy away from relying on mining alone whose results are there for all to see. We urge the government to foster meaningful partnerships with the private sector in developing other sectors such as agriculture and tourism. These sectors will not only help the country to diversify the economy but also ensure job security for most of the Zambian people as these sectors have the potential to employ a lot of people.
The Mining companies
Caritas Zambia is urging the mining companies to consider the plight of many Zambians who depend on mines as a source of their livelihood. Any suggestions that are put forward must ultimately benefit the Zambian people as rightful owners of the resources the country is endowed. We urge mining companies to seek meaningful partnership with the government and the people of Zambia in finding solutions to the current global economic meltdown.
We urge the mining companies to work with the government to ensure that structural reforms in telecommunications, energy, transport and agricultural sectors are enhanced to mitigate the effects of the global financial crisis. These reforms will accelerate the process of economic diversification which can be used to cushion the impact of the global financial crisis on the economy.
Finally, we urge mining companies to evaluate their proposal bearing in mind that the government in 2008 loosened its monetary policy to accommodate effects of the fuel and food prices shocks. It is now time for mining companies to show true partnership to the government and the Zambian people at large by revising their proposals as tax cuts will only result in an increase in the inflationary pressure in the economy which is already coming to bear as can be seen on the depreciation of the kwacha against major currencies.
Edmond Kangamungazi,
Programme Officer-Economic Justice Programme
