Government is extorting and blackmailing mining companies by withholding VAT refunds and their action has the potential to create instability in the mining industry, MMD national secretary Muhabi Lungu has warned.
Mr Lungu said government was using wrong instruments to punish the mining companies to whom it owed VAT and that it was administratively wrong for government to have resorted to blackmail as a means of monitoring the destination of copper exports.
Mr Lungu told the Daily Nation that it was unfortunate that government was holding on the VAT refunds for the mining companies after they had collected their revenues and remitted all the taxes to government.
He explained that VAT was tax collected by companies on behalf of government and that it was the obligation and mandate of government to ensure that the tax was paid back because companies needed it for reinvestment.
He stated government should find other means of compelling the mining companies to declare adequate receipts and returns because withholding VAT was reducing their investment capacities.
On Tuesday, Minister of Mines, Energy and Water Development Christopher Yaluma disclosed that Zambia was withholding $600 million in VAT refunds owed to mining companies and would only repay the tax when the mining companies produced import certificates from destination countries.
“Mr Yaluma admitted that US$600 million was owed and that government would have to pay if the mining companies fulfilled the importation requirements.
The PF government started enforcing a 2008 requirement that exporters should provide foreign country import certificates for copper shipments in order to curb tax avoidance.
But Mr Lungu said placing a moratorium on paying VAT to the mining companies as an instrument of curbing tax avoidance and cautioned that the mining sector was going to experience de-investment because of lack of recapitalization.
“The government is using the wrong instrument to punish the mining companies they suspect have been avoiding paying tax. The mining companies have complies with their obligations of collecting tax on behalf of govern and it is administratively wrong for the government to resort to blackmail and extortion to compel mining companies to begin providing foreign country import certificates for copper shipments in order to curb tax avoidance.
With this kind of action from government, there is a risk that the mining companies may experience de-investment and we are going to create instability in the mining sector,’ Mr Lungu said.
Mr Lungu however said while the MMD did not condone tax avoidance by the mining companies, it was wrong for government to adopt orthodox means of resolving the problems.
He said with the loss of the $600 million by the mining companies, government should not be surprised if the companies started shedding off some of its responsibilities such as corporate social responsibility and expansion of their businesses.
Mr Lungu explained that the consequence of reduced investment in the mining sector which was predominant factor in the growth of the country’s economy would be growth in unemployment.