President Edgar Lungu

Expert condemns decision to discard new mine tax regime

FINANCIAL and banking expert Makesa Kalifungwa says Cabinet’s decision to do away with the 2015 mining tax speaks volumes about the lack of direction and policy inconsistencies of the PF government.

Last month, President Edgar Lungu directed finance minister Alexander Chikwanda and his mines counterpart Christopher Yaluma to review the 2015 mining tax system that raised mineral royalty tax from six per cent to 20 per cent and eight per cent for opencast mining and underground operations respectively.

Finance minister Alexander Chikwanda
Finance minister Alexander Chikwanda

The directive, which many stakeholders said had made Chikwanda irrelevant, was necessitated by mining companies’ threats of mass layoffs and closures, arguing that the changes to the tax regime for the mining sector would cripple their operations.

However, the opposition political parties warned President Lungu against making arbitrary decisions to change the tax system without Parliament’s approval.

On Monday, President Lungu announced the approval of changes to the mining tax regime and tasked Chikwanda and Yaluma to take to Cabinet details for presentation to Parliament and consequently, approval.

But sources have disclosed that government wants to revert to the old mining tax system, abandoning the 2015 mining tax regime implemented in January that introduced a single tax in form of royalties.

“So that statement saying that Cabinet has approved changes to the 2015 mining tax regime which will be taken to Parliament was meant to preempt complaints of making changes to the budget without Parliament’s approval. But the fact is that Cabinet approved to revert to the old [double tier] tax system, essentially reducing from the highs or 100 per cent increments made by Chikwanda in the 2015 budget,” Cabinet sources said. “This will reduce income in the approved budget and the question is: where will the shortfall come from?”

However, Kalifungwa in an interview said the decision had only exposed government to ridicule that it had no clear policy direction on the management of the mines and could not inspire investor confidence.

Energy Minister Christopher Yaluma
Energy Minister Christopher Yaluma

“This level of inconsistency shows that there is no consultation by the ministers of mines and finance  with the technocrats in those ministries. In the first place, they should have understood that different mines have got different production costs. There are some open-pit operations mining low grade copper and this is something that these two ministers should have known before presenting the 2015 budget to Parliament,” he said.

Kalifungwa said such overturns were retrogressive, embarrassing and confusing to the citizenry that had always called on government to put up appropriate and sustainable taxes for the mines, so that the nation could begin to see tangible benefits from the country’s major export.

“This paints a bad picture on government. Those ministers could have, in fact, relinquished their positions or gotten fired. Yes, we need to tax those that are earning a lot, especially the mines but there are mines with low grade and that should have been considered. That’s why even the debate in Parliament over this issue from the government side was questionable.

There was no enough consultation and that’s very embarrassing to the State. You can’t attract reasonable foreign investment without a clear vision or policy direction,” he said.

Kalifungwa said the government seemed not to know what it was doing with the mines.

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