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Taxing mines is a daunting task, says Albert Halwampa

Taxing mines is a daunting task, says Albert Halwampa

December 09
14:36 2016
Mining in Zambia

Mining in Zambia

By Albert Halwampa
The Government recently introduced a new mining tax regime in the 2015 national budget and the reverberations of this decision are still being felt as various  Taxing mines is a daunting task
By Albert Halwampa
stakeholders express their reactions. For instance, the Chamber of Mines has warned that the new regime is likely to hit INVESTMENT.
One of the major mining companies, Barrick GOLD, has also warned of the possibility of suspending operations if parliament approves the new tax measures. Barrick claims that the $45million tax they currently pay annually will increase to approximately $150 million.
In general, it has been claimed that there has been a lack of consultation regarding this issue before the budget was unveiled.
The tax changes announced by the Ministry of FINANCE have two main elements. Firstly Corporate Income Tax for mining companies has been abolished replacing it with a mineral royalty as a final tax.  Mineral royalty is levied on the gross value of copper mined irrespective of whether this is profitable or not. Secondly, the Government has increased royalty rates from 6% to 8% for underground mines and 6% to 20% for the open pit operations.
The broader context here is the long running debate about balancing demands from the Zambian public on one hand with those from mining companies on the other. The political pressure from the public and civil society is to collect more revenue from the mines. The companies, however, argue that they are already contributing a fair share. There are no easy answers or a one size fits all to designing a mining tax system. This is evidenced by many different approaches to taxing mining firms around the world. But has the Zambian government, with these decisions, struck the right balance?

 Mining Sector. Zambia is Africa’s largest producer of Copper and Cobalt. Although copper production was affected by low copperprices in the late 1990s, Copper production has been increased since 2000. It increased to 572,793 tonnes in 2007 from a low of 256,884 tonnes in 2000, representing an increase of over 100%

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