Resistance to windfall taxes - is the World Bank joining in?

I blogged on Tuesday about a Post newspaper business editorial responding to concerns raised by the Zambia Association of Chambers of Commerce and Industry (ZACCI) that breaking mine companies contracts would create 'anxiety' amongts investors. I suggested that the ZACCI line was part of a campaign against the Government's announcement that it will impose a new, fairer tax regime on the mines, and that campaigners should pressure the big mine companies to speak up and recognise the right of the sovereign Zambian Parliament to enact an improved tax regime, and to state that they will neither initiate any legal action in response nor withdraw any investment.

Today in the depths of The Post website I stumbled across the original article to which that editorial was a response. Published on Tuesday, the article, 'Windfall profit tax on mines will cause anxiety' includes concerns expressed by a wide-range of organisations and individuals. Here are some of them:

• As reported, the ZACCI chief executive officer Justin Chisulo said windfall taxes would create 'anxiety'.

• Equinox Minerals president Craig Williams has asked the government to grant them an opportunity to study details of the windfall taxes before they are presented to parliament.Equinox last week made an announcement that US $300 million has been lost in shares following the announcement of windfall taxes. Lumwana clearly sees itslef as a aspecial case, having not taken on a previously state-owned mine. Williams noted that Lumwana was among the major green fields development in Zambia since independence and required the largest capital investment in the nation’s history. Williams stated that Lumwana Mining Company was, in addition to the mines, building Zambia’s first modern town in a generation with over 1000 houses and state-of-the-art facilities in an area that was undeveloped land with no infrastructure or services. “These houses will be provided to our employees under a home ownership scheme so that they are empowered to own the land and house in which they live,” stated Williams."Needless to say, the company is investing on average US$1.5 million per day in Lumwana (about K6 billion) and is still several months away from producing its first pound of copper and has clearly not enjoyed any windfall profits,” stated Williams in response to a press query. “In fact to build Lumwana it has taken a debt of US$584 million, the largest debt finance for a minerals project in African history that will take nine years to repay (completed by 2018).”
• Luanshya chief executive officer Derek Webbstock said, “We accept the President’s announcement since we are not here for confrontation or to argue with government, but it is a pity that we were not consulted before hence the need to take a balanced view but we are ready to discuss the matter. It is understandable the mines are doing reasonably well,” said Webbstock.
• First Quantum Minerals president Clive Newall and Kansanshi Mines general manager Russell Alley refused to comment
  
• Economics Association of Zambia national secretary Chibamba Kanyama said the mining companies actually called for this decision from the government because they did not want to voluntarily renegotiate the agreements when the calls for higher taxes started last year

None of the is particulrly surprising. However, by far the most interesting and detailed comments are attributed to Robert Liebenthal who is described as a "former World Bank advisor for Africa". I have been trying to work out what Mr Liebenthal's current position is. He appears to have been working and publishing under the World Bank banner at least in 2007. Any information from detective-minded readers is welcome. Suffice to say, if these comments are in any sense attributable to the World Bank, I would consider them profoundly scandalous. They speak for themselves, and I quote them at length.

Mr Liebanthal is quoted as arguing that the government should make it clear if the revised tax regime for the mines was negotiated or not. And Liebenthal, in an interview, said mining companies could delay or even challenge the implementation of new taxes as the previous tax regime was entrenched in binding legal agreements. “This is why it’s important to know whether the changes were negotiated or not. Since the previous tax regime was entrenched in binding legal agreements, the mining companies may have the right to challenge these new taxes in court. Such challenges could at least delay the application of the new taxes,” Liebenthal said. “The mining companies may have the right to challenge these new taxes in court and such challenges could at least delay the application of the new taxes.” He also said it was important that the new mining regime goes beyond the changes in taxes and also incorporates all developments in the sector. “The companies might also slow down or stop new investment, including investment they were considering outside the mining sector; for example in the power sector, where there were reports that they were considering investing in the Kafue project. We need to see the whole picture, not just the taxes,” he said. Liebenthal further challenged the government to state the criteria used to come up with new mining fiscal and regulatory regime in the mining sector which would see Zambia increasing its tax from the current 31.7 per cent to 47 per cent. “It is also important that government informs us on how they arrived at these taxes. Has it resulted from the negotiations with the mining companies on the existing agreements, or did government decide it unilaterally? What account does it take of the companies needs to finance new investment and service their debt? Remember that the mining companies are also investing heavily in new capacity, and some of that money will have come from profits,” said Liebenthal.