IMF guides Govt on mine taxes

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THE International Monetary Fund (IMF) has advised Government to avoid coming up with mine-by-mine tax solutions that could make the tax system more difficult to administer.
IMF resident representative for Zambia Tobias Rasmussen said it was positive that the new mining tax regime was being revisited but urged the Government to avoid a mine- by- mine solution approach that could make the tax system more difficult to manage.
Dr Rasmussen said doing so would also lead to revenue losses for the Government.
Dr Rasmussen said in a response to a query that in determining the shape of the revised mining regime, however, it would be important to avoid mine-by-mine solutions.
“The mining tax regime that was introduced this year essentially does away with the corporate income tax for copper producers and instead raises the royalty rate.
Under the new regime, royalty rates are eight per cent for underground mines and 20 per cent for open-cast mines. Previously there was a single royalty rate of six per cent.
This change was meant to make the system simpler to administer and improve tax collection,” Dr Rasmussen said.
He said the challenge with a royalty-only tax regime was that it applied regardless of whether the mine was operating at a profit or at a loss.
“This discourages investment and production. International best practice suggests that a sound mining tax regime ought to be stable over time while also flexible to economic and financial conditions.
This is best achieved with a regime that combines royalty and corporate income tax,” he said.

 

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