FQM’s tax payment representing 40 percent of extractive sector-zeiti report

First Quantum Minerals (FQM) paid over K7 billion in taxes and royalties to the Zambian government in 2018, representing almost 40 per cent of total payments made by the extractive industry, cementing its position as the nation’s largest taxpayer.

The 2018 Zambia Extractive Industry Transparency Initiative (ZEITI) report published this month reveals that the majority of the mining giant’s taxes, amounting to K4.47 billion, were paid by its Kansanshi Mining plc subsidiary. This payment alone accounted for around a quarter of the country’s extractive payment receipts for that period of K17.98 billion based on figures reported by the industry.

FQM’s newer Kalumbila Minerals Limited subsidiary paid K2 billion in taxes while the mining giant’s operations unit, First Quantum Mining and Operations’ paid K658 million; accounting for 11.2 per cent and 3.7 per cent of the government’s total revenue from the sector respectively.

The tax payments included VAT, Mineral Royalty Tax, PAYE, Import Tax and Income Tax, as well as dividends and other investment income collected by ZCCM-IH, social payments by companies, and payments to the Environmental Protection Fund (EPF)

FQM Country Manager General Kingsley Chinkuli officer said: “Our business, including the taxes and royalties we pay, play a critical role in the overall economic health and development of Zambia.

“The funds we provide to government and communities support the basic infrastructure of society – bridges and roads, schools and hospitals – as well as other local development priorities. This is in addition to the enormous economic impact of job creation and skills training.

“Being transparent about where these payments go helps our stakeholders better understand how these funds may be used.”

However, Zambia’s leading economists have cautioned the government over the 2019 mining tax regime that has raised the tax burden on mines to unsustainable and uncompetitive levels.

The new tax measures targeted at the mining sector in the 2019 budget saw the royalties increased from 4 to 6 per cent and introduced a new 10 per cent tax when the price of copper exceeds $7,500 per tonne.

General Chinkuli said that Zambian has made tremendous headway on the economic development scale through the contribution of the mining sector, but these gains could be hampered by an unfavourable tax regime.

Mineral tax systems should ensure adequate payments to both the country and to the investor. An effective and efficient mineral tax regime that aims to attract foreign direct investment should seek to adequately compensate the country while remaining internationally attractive and competitive, the FQM Country Manager said.

Mining sector taxes and royalties paid to the government contribute significantly to the national economy. During the first half of 2019, the mining sector’s direct contribution was 13 per cent of domestic revenues, according to the recent report ‘Assessment of Mining Fiscal Regime in Zambia: 2000-2019’ by Prof. Oliver Saasa and Shebo Nalishebo from the Zambia Institute for Policy Analysis and Research (ZIPAR).

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