ZCTUThe Zambia Congress of Trade Unions (ZCTU) has observed that the country’s current tax policy does not adequately support the redistribution of income, wealth and resources.

ZCTU first Vice President Crispin Munyukwa has acknowledged that mining is the mainstay of the country’s economy but noted that it pays very little in taxes and royalties.

Mr. Munyukwa says the country’s attainment of middle income status can largely be attributed to the increase in mining export receipts yet the sector only contributes less that 2 percent of domestic revenue.

He tells QFM in an interview that it is expected that government tax policy to be in line with the broader objectives of reducing poverty by strengthening redistributive policies.

Mr. Munyukwa has since appealed to government to consider revisiting the windfall taxes.

In Zambia, government has given a lot of incentives to mining companies in an effort to attract investors .

Exporters of copper and cobalt are levied 35% of taxable income whereas other mineral and “non-traditional” commodities (ie. excluding copper and cobalt) attract a levy of 15%. Companies listed on the Lusaka Stock Exchange are levied at 30% of taxable income.

Mining compnaies also pay a royalty fee calculated as 2% of the market value of minerals f.o.b. less the the cost of smelting, refining and insurance, handling and transport from the mining area to the point of export or delivery within Zambia.

In terms of relief, an investment in mining, including prospecting, attracts deductions from income tax on the following expenditures on capital expenditure; allowances of 25% on plant, machinery and commercial vehicles; 20% on non-commercial vehicles; 5% on industrial buildings.

A holder of a mining right is exempt from customs, excise and Vat duties in respect of all machinery and equipment required for exploration or mining activities.

[QFM/addition information from Ministry of Mines]

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67 COMMENTS

  1. Ok, Economics is my bread and butter and I really get roughed up when people abuse numbers and try to twist information to propagate a political Agenda.

    First of all, this report is so vague, generic and utterly false and I don’t even know which 2% of domestic revenue our colleagues in ZCTU are talking about. Can the economic technocrats from ZCTU come on this blog and clarify what they mean by mining sector contibuting less than 2%?

    This is common knowledge that Zambia’s economy is on an upward swing and that is largely driven by the mining sector and that is what is keeping us worried in MMD because we want agriculture to be the key driver and mining is not sustainable in the long term. 

    So my question to ZCTU, can they tabulate where the 98% of revenue is coming from?

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    • The 98% is coming from the us, the tax payers. Us the simple citizens are taxed more than a company & our money is just been wasted by this gvmnt of ours.
      We need to change gvmnt this year plse!!!!

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    • The 98% comes from tax payers, an individual pays for tax than a company making huge profits & these i.diots in gvmnt are just wasting our money.
      We need to change gvmnt this year.

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  2. The re-classification of Zambia as a middle income country does not imply its citizens are now also middle income, far from it. In fact studies show that Zambia is one of the many African countries that are worse off now than they were in the 70’s. Revenue from our copper and other mineral resources is boosting foreign economies, not ours. We need a visionary leadership that will demand a fair share of the piece of the pie before only crumbs are left on the plate. This, as well as demanding that all proceeds from sales of the minerals are banked in our country in order increase our capital base and reduce on lending rates. This should boost the much talked about diversification.

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  3. #1, I think this article is not entirely accurate. What the man must have meant is 2% of GDP, not revenue. The crux of the matter is that GDP is growing due to increased export and prices of copper and yet we are NOT matching this growth with a proportional increase in revenue collection from what is causing our GDP to grow.

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  4. # 1. I am very interested in this topic. Is #3 part of the solution to your query? Please clarify on the figures.

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  5. For those not on the CB let me tell you that the new mine owners have devised many ways of maximising profits . One way is to CHANGE OWNERSHIP of the company every 5 years. This way they will continue being exempted from many taxes. The other method is to export concentrates to their mother companies abroad. This way the government cant tell the full value of the metal contained. The MMD government is fully aware of these tricks but since their relatives have been given very senior position in these companies they will just look the other way

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  6. Let forget the figures. Reality is most of government revenues comes from PAYE. Zambians are subjected to heavy taxes while foreigners especially the mains pay little taxes. We not saying GRZ should tax foreigners heavily but taxing should be even and more on people making profits than the poor workers. Now that GRZ have seen the elections are near, they have started promising worker relaxed taxes but it is late and personally I am already made up how I am voting. The road to to my home has been graded, it used be a tarred road when we were kids. Why is the GRZ being nice today?

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  7. No 6 you are talking no-sense. The copperbelt has 4 smelters which currently can not handle the amount of concentrates for smelting thats why First Quantum has proposed to build another smelter in Solwezi. And who tells you that the value of concentrates an not be determined?

    No 1 thanks …  if mining is contributing 2% to either GDP, Tax, Revenue etc where is the 98% coming from?????
    The 2% number came from Bob Sichinga and just because the guy has a loud mouth everyone started using the number without any basis.

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  8. MMD bootlicker, the 98% is coming from Pay As You Earn, VAT etc. We zambians the tax payers are contributing more than the copper mines!!! The status we have attained just gives us more reason to kick out the sillly RB government and bring in the Man of Action who will ensure that the big copper mines give to Caesar what belongs to Caesar! 

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  9. No 7 How can the rest of the 98% come from PAYE? where do the workers who are paying the PAYE work? Is the mining sector not the largest employer in Zambia?

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    • Firstly, there is need to clarify this 2%. Is it 2% of GDP or 2% of government revenue? If it is GDP, then the breakdown will be in terms of economic sectors, e.g. tourism, agriculture, mining, etc. Tourism and agriculture are contributing quite significantly to GDP. However, should the 2% refer to revenue, then it will be broken down in terms of various taxes and of course the aid from donors. The largest employer in Zambia is GRZ.

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    • Know your statistics in Zambia; the largest employer is not mining but the government itself. Why do you make un necessary noies just because of nicekeleko in the mines (corrupt leaders are exploiting us on our resources). Be authentic in your blogging.

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  10. No 7  even if all the workers contributed 100% of their earnings… they can not match by any chance the contribution of mining tax to government. Zambia has 600,000 formal employment. Lets say each contributed US$200 per month. Thats just US$1.4bn per year which is 8.7% contribution to GDP. Thats if each worker contributes US$200 PAYE per month which is impossible. So Where does the rest of the 91% come from. You say VAT. who are the main payers of VAT in Zambia? Its the mines. You can get those numbers from the Dept of Statistics website.
    You need to blog with facts

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  11. #10 I did not give any percentages and mines are nolonger the largest employer. GRZ is the largest.

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  12. Zambia is being raped & we are all just watching and worst of all GRZ is cheering!! MMD is fired for this as far as most people on CB are concerned. RB has his wires swarped. How can he even say its a good thing we have moved a notch up & are now middle income bra bra bra & yet on the ground the mines have been casualising labour. The bottom line is that the income of miners has reduced becoz after being moved from permanent staff to contractors (casuals) their income has reduced. Its quite shameful really for RB to fail to address this very simple problem. Serious accidents have also been on the rise as contractors ignore basic safety regulations.

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  13. #10 you need to get it in your head that 2% is real and the 600,000 or so in employment are taking up the burden. If you don’t agree with 2% give us your figure and stop yapping 

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  14. No 12 Ok if GRZ is the largest employer give us the numbers and the average PAYE per worker… Lets calculate the possible contribution and you tell us where the balance comes from. Maybe i should do it for you..

    Lets assume GRZ employs 1million workers. at average of US$100 PAYE per months.  The contribution per year is US$1.2bn per year which is 7.5% of GDP. We also assume minign still contributes 8.7% as per my earlier comment. Total is 16.2%  So no tell us where the rest of the 83% comes from

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  15. No 11 i have averaged the figure as a large number of workers pay far much less than you…  in fact US$200 as an average is high

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  16. Its a pity that an organisation like ZCTU which is supposed to be well informed is brainless. Serious labour organisations employ economist and researchers to understand these issues better.I guess Pa Zed its just chibuku drinking and one just says a figure he has heard from somewhere.

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  17. #2 that is just your assumption and do you care to tell us if your are one of the technocrats at ZCTU.

    As for the rest , am sure   The Engineer (Australia) is doing a gallant job in taking care of you guys from Kullima Tower School of economics and Matero University.

    The Engineer (Australia) excellent job!! Thanks for taking these guys on with FACTS. keep the flame burning. 

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  18. #11 The mines revenue or sales are mainly exports. They do purchases here and there at VATABLE rates. In this regard they have high input VAT than output.Instead of paying VAT on sales they actually claim massive VAT that we citizens pay because there is no VAT on Export sales that they can collect and pay the Govt. In short they eat with both hands.

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  19. This is from the 2011 budget speech (K’ billion):
    Total Direct Taxes 7,800.8 Company Income Tax 1,337.1 Other Income Taxes   894.7 Pay As You Earn 3,710.6 Mining tax   1,858.4 Mineral Royalty Tax   404.7 Mining Tax Arrears   554.8
    From a total budget of K20,537.4 billion, PAYE just amounts to 18% of the budget. And I am not talking about GDP here. 

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  20. I hate economics,it’s too theoretical and rarely practical.Am a scientist and we believe in proving things not imaginations! Prove to me that Zambians are benefiting from these figures you’re giving us and i will believe you.

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  21. MMD Chief bootlicker and The engineer (Australia) I agree with you that this article leaves much to be desired. If people in the trade unions do not understand the economics of the country very well then how can they defend the rights of the workers? They remain yes bwana yes bwana clowns. The point that should be made clear here is that Zambia gets a raw deal from tax on minerals. You rely on statistics to gauge the improvement of the economy in Zambia this is where I have a big problem because that is not the practicality of things, the more reason why I don’t like theorists. If Mopani today sells $200m worth of copper, the payment of that copper is done in London and the money reamins in London. They will send some of it to Zambia for salaries and local suppliers.

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  22. @ Tekere Banda….unfortunately, your everyday existence is full of Economics and so dependant on it. …..For GRZ, when so many people talk about something, please, give an ear!

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  23. Cont’d from 23. Meanwhile we record exports of $200m. So on paper we are doing very well but in reality we are not reaping anything good. Other companies and the formal employed are the major contributors of govt revenue despite the mining sector being the main contributors of GDP. Our problems will never be sorted out provided we remain theorists. We need more practicality to move the country forward. Sqeeze more revenue from the mines into govt coffers.

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  24. #22 Tekere Banda, you are right on Sir! Let these self-anointed economists prove that the figures they are telling us about are truly benefiting Zambians. Economics is a just a human face given to the vampiric art of sucking of wealth out of the majority poor by the rich few in any given society whether developed or underdeveloped.

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  25. The fact is ,revenue/tax collection in zambia is so poor such that it cant be verified or equated to growth .Inflation rate varies not because we are doing fine but volatile dollar .How much we collect when a truck is using our roads from congo to rsa,how many pensioned workers work for mulit channel super markets like shprite,pick n pay .How do we give tax immunity to some investors.Name any investor that banks with ZANACO,Coin guard all these shops,were is coin from.Whcih infrastructure did an ivestor build,You guys have never seen development .zambia is landlocked and all neighbouring countries must pass thru zed if by road yet we charge no cent

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  26. #8 Ba Engineer you should have asked me to substanciate my claims @6. But typical of MMD arrogant cadres you start by insulting me. You think you know everything? Mwana just give your address and I will give you all the details including your ministers who have imposed their kin on these companies

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  27. Zambia GDP (2009 estimate) – composition by sector: agriculture 19.7%,
    industry 32.4% (mining was about 11%),
    services 47.9% (Data released on November 2010). Source: Global Finance. Note that since these statistics were compiled in 2009, Mining in Zambia has registered significant growth both in sales and physical production (about 700,000 tons of copper 2010). The 2% is typical PF hogwash, expected in their unsuccessful attempts to woo votes.

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  28. That the distribution of Zambia’s wealth is uneven is not in dispute. However you cannot distribute wealth if you have not created it. The importance of these economic indicators is therefore that the country is successfully creating wealth which can then be distributed by devising appropriate strategies. The issue of windfall or variable profit tax is also irrelevant to the topic of wealth distribution, without appropriate strategies. Countrymen and women, we are on the right track. Let’s not be distracted by the plunderers who are regrouping in PF in order to line their empty pockets by cheating us.

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  29. Uselesss ZCTU the uncaring union. MMDs bootlickers. Ask miners how much tax they pay and the take home pay. Civil servants salaries are low but……finish it buffoonn?

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  30. # 22 and 26 I beg to differ, Economics is a science. That the mines contribute revenue (real revenue) to the country the proof is from contributers (e.g. The Engineer) to this blog. That zambians are benefitting from these figures that is a different question altogether. However, try and imagine the state Zambia was in when Anlo-American pulled out were zambians better-off then or now?

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  31. “The Zambia Congress of Trade Unions (ZCTU) has observed that the country’s current tax policy does not adequately support the redistribution of income, wealth and resources.” an observation? ZCTU research by giving us the facts and not just observe. What a lie from ZCTU.

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  32. The ZCTU chap may have been misquoted about the actual figure or be it GDP or whatever but still it is a well known fact that the mining companies pay less corporation tax compared to what they make.This issue is not about how much PAYE is contributed from the mining industry,it’s about corporation tax(tax on profits)
    The tax system in zed is just crap,they let off the corporate world by charging them mediocre rates as taxes but we self employed exporters of goods including motor vehicles to Zambia are charged duty at 100% not forgetting ZRA over-values the goods we take to Zambia and they disregard genuine purchase receipts,it’s a rip off and successive govts have done ****all about it,it’s so annoying.

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  33. #28 Deja vu – Report those ministers to the ACC or DEC instead of keeping the list and complaining about so & so is benefiting from the mines.If you dont have the guts to do so, take the list to your PF toilet tissue for publication.

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  34. I still stand by my earlier assertion, this article is flawed or the trade union guy is just bonkers…There is a difference between revenue collected and GDP. In simple terms, GDP is the sum total of a country’s wealth, in this case about $16bn for Zambia while revenue contributed from the mines ($320m) = 2% of GDP. I think thats what he might have meant, I am not saying its right factually. Contribution to income can be based on the budget, in which case it becomes a different issue like; Total Revenue $3bn, 11% contribution from the mines . Again, I stress these figures might not be factual apart from the GDP, courtesy of Standard Chartered Bank.

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  35. MINING SECTOR WILL CONTRIBUTE K1.3TRN WHILE PAYE WILL BE K3.7TRN TO THE NATIONAL BUDGET. GET THESE FACTS FROM ministry of finance and national plunder!

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  36. #38, which collaborates with #21’s figures and my assumptions @ #35. We are being ripped off…so #19 MMD boot fimo fimo, mwila bwata bwatafye, common sense works sometimes. Its a fact, the mines are only contributing 2% of our national GDP.

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  37. Mulongoti says i take everything from QFM with a pinch of salt. QFM is also a Poor Finishers radio just like liitle Costa Mwansa, Musa Mwenye. Bembas Koshit

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  38. Engineer, please stick to engineering matters and leave economics to the learned. Your comparison in #11 is flawed to put it kindly. Let us look at the 2010 budget. Govt unvailed a K17 trillion budget which was to be financed as follows: K12 trillion from domestic revenue and the rest through borrowing. Now, let’s go with your assumption that USD1.4bn is to be raised though PAYE. This is equivalent to K7 trillion. That explains 60% of the revenue. The rest would come from sales tax, import duties and the various levies the Govt has imposed on us.

    I don’t know how the ZCTU has arrived at the 2%, but I assume they mean that the company tax the mines are paying would be 2% of the K12 trillion, which is K240billion. I hope this clears the air

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  39. Gents it common practice world wide for mining to write off capital investment over a period of 5 to 10 years depending on the size of the projects. Zambia is not being ripped off. If you expected that you will be collecting taxes from these mines just because the are making profit you were very mistaken. The mine has to amortise its capital investment before any taxes can be paid. I have said many times on this blog that profit is not cashflow…  Finance 101

    Revenue – Costs – overheads – depreciation (capital write off) – interest = Profit before tax (PBT)

    For investments of Us$ billions like Lumawana and Kansenshi, its most likely you will not have a positive PBT over a number of years hence very little or no tax will be paid to GRZ. The owners of capital have to be paid first. 

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  40. This is very basic finance which ZCTU am sure does not know. Pick up the financial reports of the mining companies and learn one or two things instead of just saying mining contributes 2%. Am sure if you asked this ZCTU guy where he got the 2% he would tell you nothing

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  41. #41 splaka, “I don’t know how the ZCTU has arrived at the 2%, but I assume they mean that the company tax the mines are paying would be 2% of the K12 trillion, which is K240billion”. Now I say that since we agree that we don’t have the correct figures and that the ZCTU guy does not know what he is talking about, what are we debating about? If we debate on nothing, then we are reducing ourselves to the reasoning levels of our very own Mr Sata.

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  42. No 41 My assumption of each individual paying PAYE  US$200 per month is way out of the mark as i said in my comment. Tell me how many people pay US$200 PAYE per month in Zambia.. Next question which industry contributes the highest amount of VAT in Zambia? To give you an idea. An average cost of mine production is 60% of revenue. Thats 60% is salaries and other production which are sources in Zambia in the following way

    1. Labour  : PAYE is paid
    2. Other production inputs e.g explosive etc  : VAT is paid
    3. capital inputs e.g steel which is imported  : import duty and VAT is paid

    You are simply looking at corporate tax only. Mines contribute way beyond coporate tax as i have shown you above. To have a guy say mines contribute 2% is no sense

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  43. Lets just kick this corrupt MMD out office in September 2011 and let PF reintroduce the windfall tax back. These corrupt crooks should ask themselves one simple question; Where is our copper used when it leaves the borders of Zambia? And how come this commodity has attracted business interests worldwide? If these pretenders has been oiled at the expense of Zambians, then their time is surely up.. Viva Sata Viva PF We need sanity in all instutituions..

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  44. This is how people make money…

    First Quantum Minerals, the owner of Kansanshi Mine in Solwezi, has started trading on the Lusaka Stock Exchange – making it the first mining company to do so. The company previously said it would list up to 40,000,000 Zambian Depositary Receipts (ZDRs), each representing 1/120 of a common share. The ZDRs were listed at an initial price of 4,700 Kwacha per ZDR – but at the end of the first day of trading, the price had increased by 25 percent to 5,875 Kwacha, and at the end of the second day by another 25 percent to 7,340 Kwacha. 

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  45. You would have made a 50% return in two days….
    I can bet you its foreigner who are investing while Zambians cheer on…. and wait for SATA to make them rich in 90 days

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  46. # 44 Katie Good -how does Mr Sata come in? I bet he s also giving u sleepless nights. Just accept it the man is real and yr beloved MMD will be bruised.

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  47. Lumwana at year ended December 2010 had sales of $1 billion and profit after tax and all financing charges of $269. They had cash of $319 million at the close of the year. Then someone should come and talk about expenses in mining. Copper is doing so well right now. The mine owners are not a charity. There is no way they will ever tell you that they can pay you more you have to hustle for your nation. Squeeze the money out of them. Imagine this is a new mine making such a huge profit after paying loans of $370 million. People lets have a heart for our nation.

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  48. Contd… 
    listed on LuSE). Right? if that is correct, just by giving even FREE 100% free to Zambians, FQM will be saving millions of dollars every year on corporate tax, 5% of 500 million dollars is 25 million dollars and with their expansion plans they might be reaping over a billion dollars profit every year and 5% of that.
    What economists, what accountants, what advisers?

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  49. I might be very dull to seek the following clarifications:1.) 40, 000 shares issued to Zambians through LuSE

    .2.) what price per share?

    3.) Are these 40,00 shares equivalent to 132,679 (125,679+ 7,00 shares) underlying shares issued and listed on Toronto Stock Exchange? Please go to market watch to get the news item on this

    4.) What premium/discount applied on Zambian Shares? Kwacha conversion rate used?
    5. ) Now comes my idiocracy and real question to the socalled economists who are bragging on another article where I will cut and paste this as well. Do the mining houses get 5% Tax reduction (instead of 35% corporate tax a rate of 30% is applied if they are

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  50. Banning of GMO foods, windfall tax and debt cancellation are some of the greatest achievements Mwanawasa economically achieved for Zambia. Why MMD chose to forsake what actually made them re-elected baffles alot of independent and fiscally conservative people. Just imagine how much revenue this industry would have contributed to the country with windfall tax. 2% revenue contribution in a copper booming season means the economic policies are questionable. What if the copper boom goes…what will MMD say to the Zambian people? How do you explain forsaking the windfall tax that assured Zambia that they have a piece of the pie whenever the mines are prospering? Don’t forget copper flactuates and is unpredictable in price, therefore, windfall tax is the best policy.

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  51. I like that The Engineer (Australia) has brought up an important point and I quote, “Profit is not cash flow” end quote. The sooner Zambians understand this, the better we’ll get at debating mining industry issues.

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  52. #55 That is why windfall tax works. You seem to underestimate people’s intelligence in these matters. It is not a hoodwink situation. If you define windfall tax you will find it takes into consideration your ” profit is not cashflow ” quote too. When the mines do well …so does our Zambian revenue. When mines are not making profit the Zambian revenue gets nothing. SIMPLE. So why eliminate it and make up a complicated jargon filled tax policy which can’t be clearly defined or monitored. For example, Mopani spent $4.8 million dollars on toilets. They don’t care about the cost because they can deduct it from the variable tax and claim they made no profit. Why should they even be careful about their overhead costs if they get deductions for it.

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  53. Its true but coming from mmd bootlickers ZCTU with HIKAUMBA as president is strange.Hikaumba had all his challengers fired to go unoppsed,govt engineered this&vibrant&brave MUZ President Rayford Mbulu was fired.
    Our mining taxes r lowest is da world&thats y PAYE is higher thsn mining taxes income in our budget.Mopani&Kcm r busy funding last minute projects by mmd to keep this corrupt govt in power so they keep paying low taxes.Its a shame.

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  54. Banda is going simple as that. Mines should pay more taxes, copper is at at an time high. How come there is still so much poverty. Where is the money going? Banda how much have you stolen so far? don’t you have any shame?

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