27 October 2009
THE Zambia Revenue Authority (ZRA) has embarked on special audits of mining companies to understand operational issues and other costs in the sector to ensure that the Government collects all the revenue due to it in taxes.
ZRA commissioner general Chriticles Mwansa said in Lusaka yesterday the authority wanted to get clear details on the operations of the mines and establish accurate information on how much the mines needed to pay in form of taxes.
Mr Mwansa said this in response to concerns that some mines may have underestimated their operational expenses and other costs thereby not contributing what they are legally supposed to pay to the treasury.
When he appeared before the expanded parliamentary committee on estimates, Mr Mwansa also said it was not possible to project the amount of money the Government would raise from the variable profit tax because the authority was still auditing the mines.
Mr Mwansa was responding to concerns raised by Zambezi West Member of Parliament (MP) Charles Kakoma that there was no projection on how much money the Government would raise from the variable profit tax.
He was optimistic the authority would raise the K11 trillion revenue to meet what the Government had put in place for spending.
Finance Minister, Situmbeko Musokotwane told the same committee that the reintroduction of windfall tax could have scared away investors in the mining sector.
He noted that the windfall tax did not allow the taxpayer to deduct expenses while the variable allowed the taxpayer to deduct expenses.
Dr Musokotwane said the costs of mining companies were different and that incentives for mining operations could have been killed in the medium term as a result of reintroducing the windfall tax.
He said there was no need to focus on daily survival but that the country should focus on long term and encourage more investors to come to Zambia.
He noted that some mining companies had not yet reached the levels of being taxed.
Like in other sectors of the economy, new investors were allowed a period of time to deduct their losses, Dr Musokotwane said.
He said the mines needed to ensure that their write back of loss process was exhausted and then come to tax paying positions.
Dr Musokotwane said the mining sector would be the biggest taxpayer when they all write off their losses.
He said Kansanshi Mine was in a tax paying position and the firm had been paying mineral royalty tax, income tax and other taxes, which demonstrated that mines did pay tax.
Monze MP Jack Mwiimbu earlier said when the windfall tax was taken by the Government to Parliament, MPs were misled to pass the windfall tax law which the Government was now condemning.
In the 2010 Budget, the Government has not reintroduced the windfall tax which was introduced in the 2008 Budget but maintained a variable profit tax.
On fears that money to be raised under Government domestic borrowing might be used for consumption rather than for productive purposes, Dr Musokotwane said the money would be put together with other targeted revenue for next year and then distributed to key priority sectors of the economy.
He also said the Government had set targets for the Gross International Reserves in a programme with the International Monetary Fund (IMF).
The minister was reacting to Chilanga MP Ng'andu Magande who wanted to know whether the Government had set specific targets on the Gross International Reserves as the case was for other macroeconomic targets such as inflation for next year.
Dr Musokotwane also expressed optimism that the pledges from donors would be committed despite some challenges saying the donors were expected to make confirmations by next month.
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