Vedanta "We shall not go to court nor renegotiate the new tax measures"

The Daily Mail reports that Konkola Copper Mines (KCM), owned by Vedanta Resources, will accept unconditionally Zambia's new mine tax regime.

KCM resident director, Deb Bandyopadhyay told the Daily Mail in an exclusive interview that there was no point in taking Government to court because the new mineral and royalty taxes were justified by the favourable copper prices on the global market.“The new taxes are an act of Parliament. We cannot fight with Government over something that is law. We shall not go to court nor renegotiate the new tax measures,” Mr Bandyopadhyay said.

He said the rationale behind Government’s decision to increase the mineral taxes was clear and that the matter would not be contested in anyway because KCM, the country’s largest integrated natural resources firm, was ready to pay. Mineral royalty tax has risen from 0.6 per cent to three per cent and company tax from 25 to 30 per cent with effect from April 1 this year. Some mine owners have threatened to take Government to court if it implemented the new tax regime, which they argue contradicts the legally binding development agreements they signed when they bought the mines. But Mr Bandyopadhyay said KCM would not waste time taking Government to court because it was obvious that it could not stick to the development agreements when a lot of things had changed in the mining industry.

KCM also has no plans to reduce its activities in view of the new taxes, but instead invest more. “We shall continue to increase our investments despite the new mineral taxes. Our US$1 billion investment in the KDMP and the smelter project are on track,” he said. He said while other mining companies were planning to cut their workforce to save for the new taxes, KCM would keep its workforce intact in view of the expansion programmes. Mr Bandyopadhyay said the company’s operations would go on smoothly and that there was no need to reduce on the workforce because that would send people on the streets.

In contrast, Mopani Copper Mines (MCM) last week announced that it would prune some workers to cut costs in order to meet the new tax obligations. So far, 40 expatriates have had their contracts terminated and the chop would be extend to some unionised workers. Government expects U$415 million additional tax revenue this year from the mining sector.

Parliamentary Committee Report to be presented tomorrow morning

++This entry is based on a note sent to the MineWatchZambia network by Peter Sinkamba, Executive Director of Citizens for a Better Environment, Kitwe: p_sinkamba@yahoo.co.uk. Peter's lobbying efforts are also reported in The Post newspaper today (as always with links to the Post, you need a subscription to access this). The Post also reports backing for MineWatchZambia's proposals for renegotiation of the Development Agreements from University of Zambia (UNZA) School of Mines Professor Imasiku Nyambe and Economics Association of Zambia (EAZ) national secretary Chibamba Kanyama.++

The Bill to amend the Mines and Mineral Act in Zambia has been tabled in parliament and presently it is at Committee Stage.

Relevant to the network is the Mineral Royalty Tax. According to the Bill, government is proposing to increase from 0.6 to 3% for base metals including copper. The proposal for gemstones and other precious metals is 5% and for other minerals is 2%.

The most frustrating thing is that government has inserted an exclusion clause. According to the draft bill mining companies which, by April 1st 2007, will be in possession of holding development agreements with government to pay less than the proposed figure will not be affected by the amendment. Fundamentally what this exemption implies is that we are just going around in circles. If all of the main existing mines are exempted from the increase then what are going to achieve by the increase in real terms?

The whole of last week our organization was busy lobbying with Copperbelt-based MPs, the Parliamentary Committee on Estimates (which is looking at the Bill), the Attorney General and the Minister of Mines, to on the one hand get the exclusion clause removed from the Bill and on the other hand introduce clauses which will govern appropriation of Royalty payments. We have made suggestions to the above mentioned to the effect that a percentage of Royalty tax need be retained in the mining areas for environmental and socio-economic mitigation. Our proposal is that 80% goes to central treasury, 10% goes towards a fund which will look at minerals development, and 10% is shared between the local councils and traditional councils in the areas where mining is taking place. The response on this aspect was quite favourable from above mentioned stakeholders and an assurance was given by the Attorney General that his office was going trigger the consulation process to integrate our proposal into the Bill. To support our call for deletion of the exclusion clause, we indicated that some NGOs were already pursuing various avenues through which to deal with the companies, so insertion of such a clause would prejudice our strategy.

The Parlimentary Committee will present its report to the full House tomorrow morning (Friday 23 March) at around 9am. I suggest that those concerned follow-up the outcome [MinewatchZambia will attend the report launch and report back on this blog]. I further suggest that our proposal be backed by all those concerned with benefit-sharing issues in the extractive sector, perhaps by way of a petition.
Sincerely,
Peter Sinkamba