29 February 2008
editorial
Ndola — THE rationale for revising the tax regime for the mining sector has clearly been spelt out by the Government. In addition, all the counter-arguments from the mining sector have been ably addressed.
This is why it is surprising that the industry has stuck to its original position of resisting the tax changes.
With the hard facts on the ground, it is apparent that the case for the revision of the mining taxes is justified and fair.
It would be prudent for mining houses, therefore, to take the reasonable path and work with the Government in realising the aspirations of the people of Zambia.
Mining companies have been raking in colossal sums in earnings for copper sales on the London Metal Exchange.
In fact, profits, even in lean times when the price of the metal had fluctuated, have been constant in copper mining.
In recent years, the industry has gained tremendously from a boom in metal prices. A glance at the balance sheets clearly indicates that at every stage, the share of the proceeds from the mining activity has been a skewed one.
Disproportionate amounts in copper earnings have gone to shareholders, while the some companies have already recouped on their initial payments for the assets. Only a pittance has trickled to the Zambians.
It is in the wake of this unsatisfactory state of affairs that the Government prudently decided to improve slightly the tax benefits for the sake of the people of Zambia, whose natural resources are being depleted.
The imbalance has not been righted because doing so would require a tax regime that divides earnings from the industry on a 50-50 basis. This, the Government has not said it would do.
Instead, a slight adjustment which would result in some improvement in the amount of money that the people of this country would get is what has been effected.
This can hardly be viewed as action which would undermine the operations and sustainability of the mining industry as suggested by the Chamber of Mines.
Empirical data shows that in terms of real earnings, mining companies have not had their positions eroded in any way.
For smooth and equitable operations of any business undertaking, partnerships are expected to work together for the good of all stakeholders.
Mining houses will do well to hearken to this advice. There is everything to gain going forward than backwards or stalling.
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