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Zambia:
International Mining Companies Threaten
legal Action against Government over New Taxes
February 2008.
International Mining companies in Zambia have rejected new royalty and
tax regimes and have threatened to take international legal action
against the Government of Zambia for these proposals, according to the
Times of Zambia, February 12.
This
reminds us once again of the vulnerability of poor nations when it comes
to bargaining with the well financed international corporations. In
2007, the Zambian government was dragged into international court by
another foreign corporation, U.S.-based Donegal International. In this
vulture fund case,
described by many as predatory, Zambia was forced to pay Donegal $15.5
million.
A majority
of Zambians live on US$1 a day and there is a lack of revenue for
health, education and sanitation services. As a consequence, the
government is calling on mining companies to contribute their fair share
of taxes to generate income for social spending. Most of these companies
are engaged in copper production which accounts for 80% of Zambia’s
foreign revenue.
The Zambian
government introduced a windfall tax on base metals to be triggered at
different price levels and an increased mineral royalty fee ranging from
0.6% to 3%. It has also increased the corporate tax from 25% to 30%. All
rates are effective April 1.
When
compared to other copper producing nations and global standards;
Zambia’s mineral tax has been cited as the lowest, and hence does not
hold much promise for revenue. Most of the mining contrasts were signed
five years ago when the average price of copper was US$1, 200.00 per
tonne but in 2007 copper hit a record high of US$8000.00 per tonne on
the London metal exchange. Despite this surge in copper price and
production, Zambia’s revenue still remains very low.
These
international companies secretly signed a deal with government to help
with public service projects - called development agreements. Two
decades has passed and no real public benefit has emerged from this
agreement.
Among those
international companies threatening legal action against the government
are Canadian First Quantum and a Swiss firm called Glencore
International which together own Mopani Copper Mines. Others
involved in the action are an Indian firm Vedanta Resources
(which owns Konkola Copper Mines), a Canadian company called
Equinox Minerals Limited, which along with U.S. based
Freeport-McMoRan Copper & Gold Inc., own Lumwana mines, and
China Nonferrous Metal Mining, which owns Non Ferrous China
Africa.
Civil
society groups and Religious leaders are supporting this bold move by
government to renegotiate the mining deals. If implemented, this tax
regime will generate spending income for the government which so
desperately needs to fight Zambia’s HIV/AIDS epidemic and provide clean
water and affordable primary education to million of children
Other
African nations such as Congo DR are currently in the process of
renegotiating their previous mining agreement with foreign investors to
get a fair share.
In light of
this, true development will only come to developing nations when
international investors are willing to give back equitably by paying
sustainable taxes for their business operations and start to effectively
implement corporate social responsibility in their pursuit of profits.
Action Resource here:
Undermining development: copper mining in
Zambia
A Joint
Report by Christian Aid, Action for Southern Africa, and Scotland Aid
Agency
Mining Watch Canada (MWC)
is a pan-Canadian initiative that addresses irresponsible mineral
policies and practices in Canada and around the world.
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