With the Government not keen to re-introduce windfall taxes for Copper Mining companies in Zambia, it is imperative to find other mechanisms of increasing the contribution of the mining sector to the Gross Domestic product.

The mining sector is the country’s most sensitive economic sector owing to its linkages to the external market. Copper in particular contributes about 70 percent in foreign earnings. But in terms of direct impact to the local economy, it is estimated the mining industry only contributes about 5 per cent to GDP which makes it among the least contributors to the wealth of the country.

This fact has not been highlighted but it remains the reality. The reason many citizens are calling for windfall taxes is over the fact that, apart from the support to foreign exchange earnings, employment and supplier-linkages on the Copperbelt, copper has no realistic contribution to the economy in form of taxes. The sectors that contribute the most to GDP are highly taxed and receive minimum incentives if any. The mining sector is currently perceived to be heavily subsidized by tax-payers and this may be working against sustaining meaningful economic growth and development.

It should be presumed that the government has acted in good faith in suspending windfall taxes. First, we need to send a message to the external market that Zambia will not renege on Development Agreements signed with the private sector.

Second, the mining sector holds the key for the sustenance and stabilization of the country exchange rate and balance of payments. Zambia is not yet ready to wean off the mining sector and destabilizing any further investments in the sector through windfall taxes may not be in the economic interests of the country.

Moreover, even when the windfall taxes were introduced two years ago, there is hardly any record any money was collected. Windfall taxes can be an administrative nightmare without the full co-operation of targeted companies. They will frustrate any such efforts by accommodating a huge cost structure that makes taxation impossible to administer.

In other words, it is difficult to determine windfall taxes without a clear comparative threshold at which taxes can be collected and an established threshold of the cost structure that cannot be entertained by tax authorities. My advice for this to happen would be for tax authorities to establish a cost-structure threshold based on average costs for copper mining companies globally.

The issue is that whether or not mining companies should pay windfall taxes, government authorities should still seek for ways of ensuring the contribution of the mining sector to GDP is in line with other sectors like agriculture, construction, tourism and manufacturing. There are many ways of skinning an animal for desired results.