Friday, March 29, 2024

Pitfalls of windfall tax

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By Francis Muma, PhD Candidate in International Economics and Business at Xiamen University in People’s Republic of China

I HAVE listened with interest to the debate on the windfall tax—a tax which seems to find so much favour in some quarters. We are told that the windfall tax is a one-off, but it seems to me to be spread over a span of corporate years.

Therefore, like most taxes, it will have downstream consequences and an ever-growing tail of expenditure, which will cause considerable difficulties for the Ministry of Finance in future years. Windfall tax is merely a tax levied on any supernormal profit or to use a street language it is simply a tax paid by fat cats.

I believe that the only honest way to raise tax to tackle a difficult situation is by means of income tax.

It is immediate, quick and effective of taxation. I am not sure that to grab a windfall tax just because it is handy is the best way to proceed and I fear that, in the long term, it will be proven not to have been a wise way to proceed. Essentially for any country to raise tax is to increase GDP so that fiscal revenue per GDP (T/GDP) is raised and maximised.

How do you achieve this? This is simple if you encourage investment, but how can you encourage investment if you are creating disincentives for the main drivers of economic growth by coming up with such taxes like windfall tax?

The windfall tax will erode the investment potential of those on whom it is levied. Moreover, despite the fact that windfall tax is consumption based there is no guarantee that this revenue will be effectively efficiently used in the wake of this financial abuse and corruption in most developing nations which is a chronically invested disease. This can be explicit or implicit form of corruption.

I am not particularly in favour of the windfall tax because it is a one-off tax and once the companies have been taxed and are not making any supernormal (abnormal) profit they cannot be taxed again.

On the global economy, none of the tiger economies including China would do anything so rash as to institute a windfall tax on profitable enterprises that have been recently privatised.

The imposition of a windfall tax may cost jobs. It certainly diminishes mines’ profitability and their ability to invest in schemes such as mineral explorations, which is crucial to Zambia’s long-term competitiveness against other mineral producing nations. All those potential consequences are wholly negative.

Proponents of the windfall levy argue that the tax is entirely fair, as it is based on the fundamental principle of social justice. We have seen the size of the profits on which the tax will draw. Given how the tax will be used, it is wholly right and wholly justified. It is a tax which will pay for a future.

It is what the Zambian people so overwhelmingly endorsed in the past ( through their representatives at Parliament).
[pullquote]
Proponents of the windfall levy argue that the tax is entirely fair, as it is based on the fundamental principle of social justice. We have seen the size of the profits on which the tax will draw. Given how the tax will be used, it is wholly right and wholly justified. It is a tax which will pay for a future.[/pullquote]

However, I want to argue that, windfall tax just encourages consumption which is bad for any developing nation, for any growth driven country it should tax more consumption and tax less of investment. Only when you are at higher mass of consumption stage should you tax less of consumption and tax more of investment to avoid consequences of under-heating resulting from deflation effects.

Then there are the people who want a “ windfall tax” on mining companies. Now don’t get me wrong. I have no more love for large corporations than I do for any other bureaucracy, but let’s think about this in terms of sheer economics. Mining companies exist for one reason: to make a profit. That’s usually the reason that any business exists. As such, the owners of said companies like to maintain the same profit as a percentage of the cost of doing business. Put simply, if it costs more to extract copper from the earth, then these companies are going to charge you more for it.

Taxes are just another cost of doing business, and if a mining company’s taxes go up, guess where they’re going to make up for that. If you said, “By raising prices,” congratulations! You just might be qualified to hold a real job. As you may argue that so what if the copper prices go up, since we do not use it as a finished good and in fact we have every reason to benefit. This is entirely wrong, copper prices are exogenously determined, they are outside the model of parameters of producers, it is not the suppliers who determine this price but ‘demanders’ through LME and others in Shanghai.

So by producers of copper increasing the prices will just be uncompetitive and hence out marketing themselves. Above all rising of copper prices has ripple effects on the ultimate finished products that come back to the countries like Zambia as imports such as cables, electrical appliances, phones and other electronic gadgets.

If you said, “By cutting into their profits,” well, you may be stuck with job prospects, as job creation will definitely dwindle, with dwindling of employment there will even be less direct tax revenue to the Government. Therefore, the Government will have no option but to reduce expenditure on health and education.

Furthermore, the Government will just be forced to increase the incidences of tax rate to maintain and maximise tax revenue, so the buck stops at you, as the multiplicity of negative multiplier effects is endless.

About windfall:
(i) A windfall profits tax is unfair and unbalanced. Why not tax the windfall profits of the richest men in Zambia instead, who have made tremendous profits off the Zambian consumers? If we are going to punish people for making money, why not be fair about it and put a windfall tax on the richest Zambians first?

(ii) Many participants in this debate seem to be unaware of the thousands of small royalty interest owners who depend on a modest mining income for their livelihood. A blanket windfall profits tax would create hardship and put many of these small royalty owners into an income tax rate bracket higher than 50 per cent.

(iii) All Zambians can participate in mineral profits through the public stock markets, every Zambian citizen is free to invest in hundreds of publicly traded companies and become partial owners of these companies.

(iv) Mining companies do not control the price of copper or the market for copper. The copper produced by the Zambian based mining companies is a small fraction of the worldwide supply. If you are angry about copper prices you can lobby the Zambian Government to go after CIPEC and strengthen up the cartel.

(v) A windfall profits tax is anti-investment, and goes against the principles of personal property and capitalism that we have pursued.

(vi) A windfall profits tax will hurt hundreds of thousands of employees in Zambia’s mining industry. These people could lose their jobs due to layoffs as a direct result of the windfall profits tax.

(vii) Windfall tax contributes to treasury on average of about less than one per cent of revenue from the mining industry. This is much less than what Government collects from dividends, mineral royalties, corporate tax and personal income tax of mining industry.

(viii) A windfall profits tax will hurt mining investors as it is against the principles of equity taxation and it is tantamount to double taxation.

51 COMMENTS

  1. I would have agreed if this man was a historian. but looking at the way you tackle economic issues, i doubt your phd candidacy. You seem to be entangling yourself in the mess by you not understanding clearly what Magande said.

  2. Mr Nkhata explained that government had predicted a situation where people would have been up against government because of the loss of jobs and thereby advantaging the opposition over the ruling party.

    He said that the opposition parties had also contributed to inciting people to rise against Government.

    He said that Government feared a situation where an early election would be called because of failure by Government to Govern the Country through its strategic revenue earner the mines.

    Mr Nkhata said that after the abolition of the windfall tax, Government has been able to restore jobs that were lost following the closure of most mines.

    He added that the issue of windfall tax raises so much dust and disturbances in the Governance of the country and that Government would not…

  3. no wonder you went to china. its your sponsors who told u to write such tosh. you are the pipo who are enjoying while my relatives in northwestern are going on an empty belly. if the company has made profit why not get some of it to the people.
    Look at Bafokeng in South Africa. see how sharp the king of the Bafokeng has out classed you. for every Titanium and Platinum mined from his area, grudaz have to go back and that why they have built even one stadium where the world cup will be held next month.

  4. Australia will impose a 40 percent tax on resource profits from 2012 and raise A$12 billion ($11.1 billion) in its first two years. Prime Minister Kevin Rudd, preparing for an election within a year, said the changes will help the government pay for additional hospitals, retirement benefits and company tax reductions.

    The difference between Australia and Zambia is that Australia is a developed country and still want to develop,by taxing mines,Zambia is a developing country,poor and still want to beg and get loans,meanwhile they can get the money from mines.Zambia,the real Africa

  5. I invite MrK the marxist economist, Senior Citizen a Conservative Economist, Mr.Capitalist, Chola Mukanga the neo-liberal economist and all of you with economic fire in your bellies. come debate this thesis by your fellow economist Dr.Francis Muma, PhD Candidate in International Economics and Business at Xiamen University in People’s Republic of China.

    The topic is “Pitfalls of windfall tax”, which way to go?

  6. Good article. What does socialist MrK have to say about himself now. Is he going to rant on his Pro PF maravi blog about how mining companies made profits of $2.4 billion dollars in 2004?

    Here, MrK has been discredited by a PhD Candidate in International Economics and Business at Xiamen University in People’s Republic of China. It is interesting what argument socialist MrK will come up with to discredit this article. I suspect he will regurgitate the same comments he makes over and over again concerning windfall taxes.

  7. Very good researched article. Let me add on by saying as we can see, slowly but sure the economy in most of our mining cities and indeed the country as a whole is now getting better. We should not error by succumbing to shortsighted theoretical politician trumpets on taxation. Theoretical politicians look at macroeconomic variables with paranoia. These mining companies invest billions in their production before they take one penny out. Let’s avoid doing anything to jeopardize their investment in the mining sector.

  8. I believe that over taxing mining isn’t the way to move Zambia out of its economic challenges. State government needs to become “more efficient and determined in diversification of the economy from mineral dependency syndrome
    With exponential investment in the economy, I predict a recovery and real economic growth in 2010-2011 when jobs in the state should grow by an inspiring percentage after many years, followed by 8 percent GDP growth in 2010.

  9. The mining industry isn’t the only business sector in the country that should pay more in taxes. Let the economists help in looking at the challenges of formal taxation in all sectors including the informal sector drawing billions unaccounted for Kwachas. Its time to examine all forms of businesses. The problem today is everyone is looking for a single industry — mining — to fix all our financial and economic problems. You can’t put everything on the back of a single industry.

  10. Australian experience on windfall tax.
    Mining giant Xtrata announced it would cancel all exploration activity in Queensland which will put a cloud of uncertainity over jobs and health of the regional economy.
    There also numerous reports of companies turning their attention to Africa for long-term exploration and development. conrast and compare

  11. Macquarie Bank is reportedlyn advising its clients that Australia was now seen as being a high sovereign risk destination to invest. Mining shares have sunk since the announcement of 40 percent tax.
    Business politics??????

  12. Yeah, this a PHD (read Pull Him Down) treatise and who but a guy with questionable though process. This site is not ayoba at all. I may have to reconsider my affinity to it.

  13. This thesis, fail to highlight that our mines have the cheapest cost of electricity, that they are subsidised by the few zambian workers that hoold a job. Yes the price is not determined by the mines but customers and that why the windfall tax was passed. these companes are not here to do zambia a davor but business, so zambia should not do them a favor either. the thesis also fails to show the comparison of taxes that these same companies pay in other contrious where they have mines. let not just look at what tax they pay in zambia, lets have a a global persispective on mining and see if wuindfall taxes are not justfied. at the curreent rate, these companies have been paying taxes that are less than 10% of there annual revenues, while the zambian worker pays not less than 25%.

  14. This man is an embarrassment to his university. Any investor puts in his money into a venture because he expects normal profits. As long as profits are normal, investors will come. The windfall tax is a tax on supernormal profits, that is profits which far exceed the normal rate of return. There is no investor who will run away just because he has to share his supernormal profits with Govt in the form of tax. It is like suggesting that you will not want a higher salary because the tax band on it is higher. Seriously, the university he is studying at should expel him. What kind of warped thinking is this? And unfortunately, this is the same thinking in Govt. When the windfall tax was introduced in 2008, did you see any of these guys running away?

  15. And let us not forget that we are also subsidising these mines by letting them pay electricity tariffs that are way below the market price. Zesco is busy increasing tariffs on retail consumers but the biggest users of electricity, i.e the mines, have not had an increment in there rates for years now.

    The govt is also busy introducing new taxes on the same people it has been taxing for years. Carbon tax, the proposed increase in road levy, electricity and fuel hikes, all these are affecting the same people. Incidentally, these are the same people in the maximum PAYE tax bracket.

    And for the destruction of our roads, why aren’t we holding the mines to task over this? All you *****s who are in support of not taxing the mines, have you been to the Copperbelt of late? All the roads are…

  16. Cont.
    All the roads are full of craters, and you need a 4×4 just to drive through most of these towns. Are we saying that creating 8,000 jobs is worth all this damage, not to mention the environmental damage as well? And the author is busy suggesting that just because a small minority of individuals are benefiting from the tuma small royalties they are getting, we have to not tax the mines. My foot! Maybe the man needs to revisit Economics 101, and take enough time to study pareto optimality (the greater good is always in the nation’s best interest). If a few individuals will be hurt, which I doubt, for the benefit of most Zambians in the form of income tax relief, I say tax the mines, baby tax!

    Australia is doing it, and they are richer than us, let’s did it as well!

  17. windfall taxes are like a bonus that is given to employees for exceeding their companies targets. so it is in the same vein that we zambian through our government should be able to enjoy some not all of the mining companies supernormal profits. if you look at the windfall taxe of 2008, you will see that it is progressive and not fixed. so it is a fallacy to suggest otherwise ( that it is over 50% from the first cent made by the mines), it was targeted on certain prices just like it is with with PAYE. Dr. Muma, please widen you research instead of one sided (narrow as you have done here). when we make those holes in our ground we destroy a lot(farning) and we will never again mine in the same places. remember our mnerals are not replaceable and so we should do something before they run out.

  18. With all due respect, this man should go back to Zambia. Seems he is negatively influenced by the Chinese. I dont see how any patriotic Zambian would speak against windfall taxes. Cant say more.

  19. the chief, Splaka thumbs up for the fair and very reasonable comments.

    the author of the article is very shallow in his thinking more especially on his suggestions
    worse still he does not understand what benefits the windfall profit taxes can bring to zed.

    learn from DRC
    “The companies make so much more from the higher prices, that’s why they’ve said in Katanga you have to pay $60 a ton for concentrate,” he said.

    Congo wants to triple its mining revenue this year to almost $90 million after lower prices caused by the global economic crisis forced more than 40 miners to suspend operations in the country, according to the African Development Bank.

  20. This article should be called: In Defense Of Foreign Profits. The arguments put forward to defend the rights of foreign mining companies to rob the Zambian economy blind are ridiculous and do not stand up to scrutiny. There is not enough space to go through them one by one, but I’ll try.

    ” I believe that the only honest way to raise tax to tackle a difficult situation is by means of income tax. ”

    Well that is simply not true – ‘profits’ are the easiest thing to hide, because you can fudge costs through deductables, amortisation of loans, etc. Most major corporations in the USA do not pay taxes as a result. They are experts at hiding profits. It is no surprise that most modern corporations have their headquarters in a tax shelter. I could stop right here.

  21. ” However, I want to argue that, windfall tax just encourages consumption which is bad for any developing nation, for any growth driven country it should tax more consumption and tax less of investment. ”

    More economist gobbledygook. In a country where the vast majority live on $1,- per day, ‘consumption’ is the last of the economy’s worries.

    Companies need customers, which means they need consumers with disposable incomes. Otherwise, all increases of production will be for consumption in distant markets (apparently promoting consumption in the West is not a bad thing?).

    The problem with economics is that it educates the good sense right out of people. I suggest the writer switches from economics to finance, before it is too late. 😉

  22. ” Taxes are just another cost of doing business, and if a mining company’s taxes go up, guess where they’re going to make up for that. If you said, “By raising prices,” congratulations! You just might be qualified to hold a real job. ”

    But only as an economist. 🙂 Miners are beholden to the world market, they can’t independently ‘raise prices’. What they can do is reduce exploration and other costs – but that too will cost them money because of undiscovered deposits.

    When copper prices rise, it is a bonus for them they did not count on – it is just extra profit, and it didn’t cost them a cent. And that is what happened with copper prices.

    Before letting general economic principles loose on mining, it is best to first understand the business model of the mines.

  23. Ooh come on. Taxation isn’t the way to move Zambia forward then what? To continue borrowing for consumption and enslave our children with the debt burden? Spare us. Some of you chaps are typical cadres, if tomorrow MMD see sense in what people are saying and introduces the taxes you will again turn around and start justify it. Francis Muma, PhD Candidate the reason why people want the Windfall Tax is because these investor can not be trusted to declare there profits so that we can charge Income Tax they inflate costs so as to have very little profits and pay less tax. In most cases there are not preparing there annual returns in time. In some cases we still have final reports from 2004 still being awaited. And you still expect those reports to be correct. Dont be foolish.

  24. ” (ii) Many participants in this debate seem to be unaware of the thousands of small royalty interest owners who depend on a modest mining income for their livelihood. A blanket windfall profits tax would create hardship and put many of these small royalty owners into an income tax rate bracket higher than 50 per cent. ”

    Note to the writer: ZCCM-IH is not paying dividends. This is because the foreign owned mining companies *are experts at hiding profits*, which means they also minimize dividend payments (which are a percentage of profits per share).

    The problem is that the foreign ownership of the mines facilitates corruption, and government capture by foreign miners. The mines should not even be in foreign hands. As long as they are, they should pay $1.2 billion + a year in…

  25. I thought you knew that even you making K500,000 profit with your Ntemba can easily reduce that to K5,000 (by inflating expenses) and have pay tax on the K5,000 instead of the actual amount. This is whats happening on the ground. Don’t analysis things as if you are writing an economic fiction book. You also said hundreds of thousands of people would lose there jobs. Last time I checked the people employed by the mines did not count up 100,000.00 (educate me) and most of them where casual labors paid peanuts. When we tax the mines the billions of Dollars will flock into the country. We can invest in infrastructure (instead of borrowing to maintain roads) and education, the Kwacha will gain making it cheaper to import construction or manufacturing equipment and raw materials.

  26. ” (vi) A windfall profits tax will hurt hundreds of thousands of employees in Zambia’s mining industry. These people could lose their jobs due to layoffs as a direct result of the windfall profits tax. ”

    There are no ‘hundreds of thousands of employees in Zambia’s mining industry’. President Banda in his speech mentioned 58,000. That is 1% of Zambia’s labour force of 5,398,000 (CIA Factbook).

    The mines are not there to ‘provide jobs’ (as neoliberal ideology would have it), they are there to capitalize the rest of the economy and create a REAL multiplier effect on agriculture, manufacturing and infrastructure.

  27. I rent my property and say the tent: I will increase rent whenever your employer raises your salary. Sounds socially and morally correct. But…..?
    But I think the income tax this guy (Muma) mentioned is fair. Tithe in the bible is based on something like income tax I think. To me he has done better but thanks MrK for educating us.
    Anyway keep talking guys

  28. ” (viii) A windfall profits tax will hurt mining investors as it is against the principles of equity taxation and it is tantamount to double taxation. ”

    It are the Zambian people who are double taxed through 1) PAYE and 2) local taxes and levies, when local councils should get their budgets from national revenues.

    In fact, if you do the math, the mines created 58,000 jobs, but they made 2.4 billion in profits (more today, going by 2004 numbers).

    By allowing them to keep all their profits and not taxing them WE ARE PAYING THE MINERS $41,379 PER JOB CREATED.

    This is why the Zambian people are poor. The miners are not doing us a favour by ‘bringing jobs’ as the morons from the MMD like to put it. We are paying them $41,000 per job ‘they created’ by not taxing their…

  29. But you guys don’t you think NATIONALIZING the mines like King cobra says he will direct can stop all this debate in its tracks. Why exactly don’t we appreciate king cobra’s 90 days trick? We need to remove this degree article in the constitution. It is failing us right here on this thread.

  30. ” If you said, “By cutting into their profits,” well, you may be stuck with job prospects, as job creation will definitely dwindle, with dwindling of employment there will even be less direct tax revenue to the Government. Therefore, the Government will have no option but to reduce expenditure on health and education. ”

    Complete garbage. When the mines are taxed $1.2 billion or more per year, there is enough money to start growing agriculture, manufacturing and infrastructure. Which means there will be massive job creation, way beyond the paltry 58,000 jobs in mining (Zambia has a workforce of 5.3 million, 50% or 2.65 million of which are officially unemployed).

  31. And ‘the government will have no option to reduce expenditure on health and education’ – what a cheek. You are mocking the dead, and the tens of thousands of streetchildren who should be in school.

    People are dying in hospitals without treatment and children are out on the street while fat cat politicians go off to South Africa for treatment and send their children to private schools abroad.

    And it is all because they take bribes so foreign mining companies don’t have to pay taxes like ordinary people. There WAS universal education and healthcare – when the mines were in Zambian hands.

    I say let’s forget about taxing these dirtbags, and NATIONALIZE.

  32. 32 Struggling Financier, ” But you guys don’t you think NATIONALIZING the mines like King cobra says he will direct can stop all this debate in its tracks. ”

    That would be great. It is more than time. I would like to see some protections for the professional behaviour of parastatals, but that is a matter of having someone with integrity in power. It is time for a chchange. President Sata sounds very good to me.

  33. # 7

    one the one hand, Francis Mum an economist paid by chineses, RB and his clique, one the other hand IMF, FORMER finance minister Magande, the australian govt

    according to Capitalist, IMF, former finance minister Magande and, the australian govt are PF members !! LOL LOL

    one the one hand Capitalist and his hot air to denigrate Windfall taxes, one the other side MrK and his sledgehammer arguments

    capitalist, it’s hard to be devil’s advocate, isn’t it? 😉 😉 😉

    perhaps it may be well paid… :d :d :d

  34. Zambia should look at having a competitive advantage. With the same cost of doing business and same expected returns, an investor would rather invest in Canada, Australia or South Africa even; countries that have superior infrastructure. One way is by having a fairer tax system. If someone puts their money to a project and it produces supernormal profits, so be it. This is like lotto, you have to play to stand a chance of winning. If I play lotto and win, why should I share it with people that didn’t want to play?

  35. This is not lotto @Nero this is our copper being plundered while our children die from curable diseases. Its not like nobody owns those resources like people who live there are animals and therefore anybody who, can come go there and loot and damage the roads and environment leaving us borrowing billions of dollars to reconstruct the roads, no. This is like mineral royalties, the investors buy copper from us process it and sell it. Only they have to pay after they have sold nobody loses out. Is it worth it really that if the investors are taking out $5billion worth of copper every year, don’t you think that Zambia is being swindled the same amount worth of copper every year. Multiply that by 10 years. And you still wonder why Zambia has dropped from developing country to least developed.

  36. This article is not exploratory and does not seem to appreciate what a windfall tax is in itself even though the author has defined it.To suggest that there should be a windfall tax for the richest people in zambia is a very retrogressive argument and undermines the idea behind a windfall tax.I think the whole tax system in zambia needs to be overhauled to something that is broad based through viable options…like broadening the salaries taxpayer base and introducing a new broad based consumer or indirect tax.And as a way to raise revenue,formalise the informal sector and recognise it in the tax system.I am greatly in favour a windfall tax and as the author writely states(though he seems to want a ‘permanent’ windfall tax),it’s temporal and applied to windfall profits.

  37. There is an excellent challenge/defense to/of the Windfall Tax on Zambian-Economist /com. Check it out. Hats of to Chola M.

  38. “despite the fact that windfall tax is consumption based there is no guarantee that this revenue will be effectively efficiently used in the wake of this financial abuse and corruption in most developing nations which is a chronically invested disease. This can be explicit or implicit form of corruption”

    but zoona…..how can you project corruption…… silly economist.

  39. “Windfall tax is unfair and…”.My foot, what kind of a Phd are we dealing with here? Every genuine tax fundi, like me, will tell you that “there is no equity with a tax”, period bwana! Your analysis sounds so basic and incoherrent, it is criminal to even refer to it as an ‘analysis’. As you do your thesis learn to do research before you expose your ignorance as you have just done.

  40. Thats why i reserved my comments. U r zambian and against windfall tax.
    There is something i tend to learn from all of us bloggers article writers like our Francis above. Seems we cant bring development to our own counrties. India, in particular, sends its own citizens to go and pursue education in the USA and other well developed economies. In return, they have the ably experties to tackle all sorts of issues hauling their economies. In zambia in particular, its different. From abroad, all you think about is to go and do politics and loot. Or kulwisha kapoto mu govt. Sickos. Lets learn to help our countries.
    I have a friend who has just returned from the USA doing Masters. In his thesis, he wrote blusting these people who think we are so shallow. He is back helping his country develop.

  41. It is very simple here and i am no economist! $4 billion industry and you only collect $50M tax income and the rest fly away to china!! The chinese get rich to buy your corrupt govt and also buy your country using your money! who is losing out here?

    You ba fipe ama loosers! PhD my musula!! Wake up. It does not matter if we loose jobs now but resources will still be there for our kids to exploit! Its our god given right and may be copper will be 20 times more expensive then. Look at the models being adopted in Ghana and Iraq. These guys pay companies to mine their oil and everything is theres!! Simple – You mine so much, and we pay so much! Nomba imwe you thick GRZ, mwaleka bamilila copper. Awe….. kanshi.

  42. 44 Kuomboka ne nsaka, ” Look at the models being adopted in Ghana and Iraq. These guys pay companies to mine their oil and everything is theres!! ”

    You are absolutely right. The government should tax existing mines to the max, and use that money to buy an existing mine or have one built for it, and pay whoever they want to, to manage it for them,or have it managed by the civil service. That way they keep all the profits.

  43. this article my a.s.s…..another j.a.c.k.a.s.s! cant say much. this article is nothing short of shit.

  44. Book Knowledge ebwafya!!! Ala lekeni uku pounda amabooku yakale. Any brand new textbook is at least 10-15 yrs old at time published. Real life economics follows trends!! Current economics & finance are hugely influenced by simple SPECULATION!! -hence the world economic crisis. If Zambia were to impose even a modest windfall tax, in concert with Australia, it narrows down alternate sources of the prized resources, thus these investors will not run away, even if they did, it’s only a matter of time that our untapped resource will be required, probably for even a higher price, as our production costs will still be lower than other places where resources have been exploited to their fullest & cost of doing so continues to spiral!!

  45. I am very impressed with the way Francis Muna has articulated issues on the windfall tax. He has done it in a very scholarly manner. Che Guevara is supposed to rebut in a scholarly fashion as well, not attacking the individual. Can we have points from Che guavara. The issue is that this issue of windfall tax is still an issue which is being debated by very senior economists. There is no clear cut direction as regards it’s practice. I would not say that it is one of the best practice issues in economics. Remember that we need to learn from best practices and not experiments which were done somewhere and they do not have holistic scholarly acclamation and support. Let us first educate our masses on the pros and cons of a windfall tax and what the whole concept is about ad we have to tell…

  46. Too many jokers, I must say and admit. Dr Francis Mulenga Muma, in his scholarly article was more than 100% correct. People should realise that windfall tax (WFT) simply transfers resources from people with higher capital productivity to those with lower capital productivity, that is from the people with higher affinity to invest to those with lower affinity to invest. The clever way to go by is by imposing variable income tax (VIT). Which I believe MOFNP is doing where Dr Muma worked upon his return from UK where he had gone to do his Masters in Development Economics. Aboveall unlike VIT, WFT is highly distortional and very untransparent, investors easily avoid to pay it as they conceal profits since it targets profit as opposed to VIT which targets total revenue product (TRP).

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