Ideas for a better Zambia
In addition Magande strongly feels that, re-introducing WTax now would be a
good policy direction
– without which otherwise the investors’ confidence would be affected. He further feels that, flip flopping on WT question puts pressure on the Zambian Kwacha. A
in this discussion comes from the previous MMD government people – bestrepresented by ex
Minister of Finance
Dr Situmbeko Musokotwane
. Withoutexplicitly saying whether he is for windfall tax or not, Musokotwane however charges that –so long as PF government fails to immediately
re-instate the WT
as they promised during theSeptember campaign, getting to power would be seen as by “false pretences”. [
The Post,December 7, 2011
].Under Pres Rupiah Banda (RB), Musokotwane was the strongest voice fighting against there-introduction of windfall tax, even if many people still remained skeptical. In fact, there aremany Zambians who accused both Musokotwane and RB as being unpatriotic sons for opposing the windfall tax. The inspiration for what I call “
” wasbased on the premise that – China would continue propping up Zambia financially, hence,sources of budget money was secure. Along these lines – i.e. being either in favor of or against WT, let me now discuss some
I see pertain to either side. For those seeking more details, there is a robustdebate on this topic on
. [see www. zambian-economist.com]. About ayear or two ago, Chola Mukanga (Cho) – founder of Zambian Economist, presented anexcellent discussion on WT in an essay form headed:
Eight Reasons for Rejecting Higher Mineral Taxes
. Cho discussed in detail pros and cons for each reason.My attempt here is therefore not to repeat that discussion but just to draw distinct boundariesbetween those who support the re-introduction of WT and those who don’t. A foundation weshall fall back on later when I go through the
. Among the arguments raised by those
higher taxes (the Musokotwanegroup) – increasing windfall taxes, include:-
This camp contends that there is no investor who could risk their capital if at all theycannot expect good returns. By extension, this group therefore sees low taxation as astrong incentive for attracting more investments.
They argue that unless you have favorable tax holidays, concessions, and exemption or low both royalties and windfall taxes, you cannot expect to attract foreign directinvestments (FDI). [The assumption here being that the bulk of investments would haveto come from outside].
Regarding the viability of taxes, Prof Clive Chirwa, a presidential aspirant (
) – [
see Zambian Economist, Nov, 2010
], observed that: “good investors with aheart will accept tax of eight per cent on royalty and 25 percent on windfall tax”.
But this group believes that if the PF government re-introduces a 25% windfall tax thatwould be scaring away new investors.
In cases where agreements and other concessions have been signed between theZambian government and the mining investors – those should not be broken, terminatedor tampered with. Doing so would not only be regarded as violation of ‘
Rule of Law’
, butwould be sending a bad signal to the investors. According to this view, the rule of lawmeans respecting international agreements, which are legal contacts. These must remainbinding no matter what.