Mining Taxation - What Are We Doing About It?

Many economists in Zambia right now call for windfall tax for the mines in order to make mines contribute their fair share of taxes. Basically the idea is that mining is receiving a lot of returns as the copper prices are high. We should therefore setup a mining tax regime that will be able to capture that "extra" profit that the mines are getting. Its a fair argument and one that makes sense when you look at it. Every work pays taxes, Zambia being a small economy, the taxes needed to provide services are smaller. Therefore the profits that the mines make in a day would nicely cover all the expenses.

However, we must never live believing the mine owners are interested in the wellbeing of Zambians. If they did, the economy of Zambia right now would be far better than were it is right now. Only a fraction of what they get would change everything. But its that greedy and selfishness of mine owners that make the windfall tax a useless path for me. I know a lot of economists would be shocked to hear that. But I have points that need to be taken into consideration before you judge me.

Stealing Benefits Them

Mine owners will do everything they can to steal every little Ngwee they can from Zambia and proudly send it to the west without a problem. Switzerland makes more money from mining of copper than Zambia. Do the Swiss people have windfall tax?

These people will proudly contribute to the tax in Switzerland than Zambia where the copper comes from. All sorts of transfer pricing and complex avoidance of tax methods are employed to make sure they pay nothing to Zambia and pay a lot more to Europe.

The point is, its not the windfall that will make someone eager to steal wealth from our mines to contribute a fair share. They aim at stealing and having a windfall tax when there is a complex plan of transfer pricing, will bring little to the treasury in any case.

Most mines "sell" the produce at "arms length" to their sister companies. Now if that was true, Zambia would raise money tax revenue from copper that Switzerland. Since it isn't, there is a proper case to assume the "arms length" being talked about does not exist. If there was even an ounce of honest in mining companies, the returns from copper would be in levels that we would not complain about.

Government Has Sovereign Right to Tax 

We have to remember for this discussion that a government has the sovereign right to tax. Government is the only power that can tax or not. It has control on what it can tax and how it can tax it."

Allison Christians

"Tax policy creates and reflects relationships between the market, the citizen, and the state. As a result, traditional tax policy discourse centers around the premise that decisions about taxation should be made exclusively within nations, independent of outside concern and interference."

What we need to add to that is that, tax avoidance has outside interference and its that outside force that make certain decisions irrelevant. Windfall tax being one of them. It is easier to avoid the complexity of taxing these companies that make people choose a simple path of windfall tax. I think otherwise. We should remember that our government has the right to tax without interference, and it should make the right decision to tax.

So unless there is no way of detecting the avoidance of tax in the system, the government should make the right decision and take necessary steps to tax all that need to be.

Are We Going Back on Tax?

I always complained about lack of export duty on mineral outputs. Seriously, this is a wasting asset and we allow it to go out of the country without the exporter paying anything? That was a bad thing that the previous government took on board.

 

However, this has been nicely worked on and there is progress in that direction. What worries me is the loss of the "Sovereign Right" to tax. What we cried about on copper seem to have been transferred to Manganese!

Manganese is it now the new plan to change from copper to manganese? Or is it that the new players in the powers are linked to manganese? This is something we need to work on and not go back on taxation.

 

Why allow people to export and not pay for the wasting assests and you complain about the failure of the mining industry to contribute to the revenue share!

 

Nothing is more to my heart that a failure of the system due to the people involved in it. Seriously, we have the most sacred job of taking care of the country now for future generations to benefit from the wealth that we have. But the moment we come into the picture, we come up with plans of making sure people "steal" the assets that are needed to develop the country. We should not make statements which are parallel to what is happening on the gorund we must take it upon ourselves to ensure we do what is right for the nation. This clearly is not happening at the moment. It has not been happening for the past 30years or so. Zambia is bigger than all of us and we must be within our powers what is right.
I seriously didn't expect that the country's wealth will continue getting out of this country without paying the simplest of all charges - export duty. But it is happening.

Coins: K1.00 and 5 ngwee

The K1.00 coin (Former K1,000.00) and 5 ngwee are featured here. You realize that it is hard to talk about coins as Zambia has not had them in a while. We had them, but they were not worth anything.

So this is a very useful introduction in the economy. We have an opportunity to use this form of exchange for a lot more issues. To note are the durability issues as compared to paper money. Coins are durable and so less money will be spent (money which was spent in printing paper money every now and then). Once coins have been minted, it takes a relatively longer period for the next session of minting.

Here is a close look at the one kwacha (K 1.00) and five ngwee (K 0.05) coins.

New K100.00 Note

The new K100.00 note is note a re-based K100.00 that we have had. People need to know this as the note may be subject to a lot of fraud activities.

The K100.00 is the highest note in the new Kwacha. It is roughly US $20.00 in value. Whilst the old K100.00 is about US $ 0.02. However, the note created did not take into account the problems the note would cause for the ordinary people. The similarity between the notes is not that great, but the difference are too little for the people who have not seen the notes before. If you have seen both, there is no problem. But failure to even be exposed to one will bring problems. 

Look at this:

The notes are way confusing for the ordinary people and the villagers. This is not a good if you know what I mean. But lets let the people judge and tell us what they think about the two notes.

I think the note should have a different colour, bigger than the old one and totally different from this.

Rebased Kwacha - K2.00

One of the new notes that was not previously in the Zambia economy. Not possible to compare with any other as its uniquely new.

I believe the new K2.00 will make some transactions simpler. But then I again, I may be wrong.

I expect this note to have very little if any problems at all since its a new entrant on the market. Maybe the women selling on the streets may be confused in the initial days but quickly adapt to the trend of new notes.

I have slowly been taken by the wash-out look of the other notes, but the K2.00 is uniquely  its own colour so maybe the wash-out will not be linked to this one.

Rebased Kwacha - K5.00

This is another one of our beautiful note simply re-based. The features are almost the same.

Very few people would be confused with this one. It simply looks like a wash-out of the old note. I am already falling in love with the "wash-out" looks. I believe I'm not the only one. Maybe we got used to the old notes.

Rebased Kwacha - K50.00

The once mighty ninja (K50.00) is back. This time dwarfed only by the introduction of K100.00.

So another one worth looking at is the K50.00 which is a re-based K50,000.00. Of course this just looks like the washed out note when you look at the colour. But I do love the new look and far better than the old one.

So the K50.00 note is the second highest note in the new Kwacha. It has to be one we should be familiar with at all times.

Rebased Kwacha - K10.00

I have just got news people have been demanding for the new kwacha like mad. So Kwacha Economics thinks you should see the different notes and see if they really live up to the "New Money Same Value" idea.

K10,000.00 has now become K10.00. Ideally, this is supposed to be of same value and the touch of looking similar just adds some good to it. Below are the front and back. 

I think it really is new money same value for this one. Anyone thinking otherwise?