Private sector fears mine tax revision

THE private sector fears that the reduction of mineral royalty tax to nine per cent for both open pit and underground mine will have adverse effects on the economy.
According to Reuters, Government has set mining royalties at nine percent. The news agency is quoting a State House source.
Private Sector Development Association (PSDA) president Yusuf Dodia said pegging the tax at nine per cent meant that targeted revenue collections for the year would not be met leaving economic performance vulnerable.
“This will have a serious implication on the economy as most of the projected revenue would not be collected,” Mr Dodia said.
He proposed that to offset the lost revenue on the changes to the 2015 budget, there was need for the Government to re-introduce the Statutory Instrument 55 of 2012 which required the declaration of exports, to effectively collect revenue from the mining exports.
Zambia Institute for Policy Analysis and Research (ZIPAR) researcher Albert Halwampa in a document dubbed “Taxing mines is a daunting task” said the right way forward was to adopt a balance between taxes on profits and royalties.
“What happened with last year’s budget points to the difficulties with raising money through taxes on profits? In 2013 the Government expected to raise K2.7 billion from Corporate Income Tax, but only collected under half this amount a negative K1.1 billion,” he said.
Reuters reported that the nine per cent adjustment was in an attempt to prevent looming job cuts and mine closures.
Zambia’s decision to increase royalties for open pit mines to 20 per cent from six per cent and those for underground mines to eight per cent from six per cent in January had rattled unions and miners, forcing the government to review the plan.
Global mining firms running mines in Africa’s second-largest copper producer had expressed concern that the new royalties could harm their earnings, and some warned of shaft closures that could have led to the loss of about 12,000 jobs.
“We are reverting to the 2014 mining tax regime except that the mineral royalty will now be at nine per cent across the board,” the source told Reuters.
Cabinet had approved the proposed changes at a meeting on Monday.
The proposed changes to the mining royalties came about after President Edgar Lungu last month directed the finance and mining ministers to amend them by April 8, saying and consider temporarily reverting to the tax regime that prevailed in 2014.
Cabinet would discuss details of the proposed changes on Monday before they were presented to Parliament for approval at a later date that was not immediately disclosed.
Some of the foreign firms running mines in Zambia include Glencore, Barrick Gold Corporation, Vedanta Resources and Canada’s First Quantum Minerals.

Credit-KENNEDY MUPESENI -Times of Zambia