President Edgar Lungu

Mines seek return to old tax regime

MINING companies want the 2015 mining fiscal regime abolished and a shift back to the double tier taxation system.

And independent economic consultant Professor Oliver Saasa has wondered why finance minister Alexander Chikwanda and his mines counterpart, Christopher Yaluma, had to wait for presidential directive over a tax regime that was hurting the mining sector.

On Wednesday, President Edgar Lungu ordered the immediate review of the 2015 mining tax regime which mining companies rejected.

President Lungu directed that the ministries of finance and mines review the mining tax regime and make recommendations to Cabinet by April 8, acknowledging that it poses a challenge to some mining houses.

Reacting to the directive, Zambia Chamber of Mines president Jackson Sikamo said the sector had welcomed the decision as it presented both parties with an opportunity to achieve key objectives.

“We have been very consistent in saying that we need to have a stable fiscal policy, which guarantees adequate revenues to government on a sustainable basis,” said Sikamo. “Going back to the [old] mining tax regime will offer us the opportunity to immediately achieve the major objectives to release revenue to government and also sustainability to the mining industry.”

And Prof Saasa said Chikwanda and Yaluma should not have waited for President Lungu to order them to reverse mineral royalty tax implementation.

Prof Saasa, who is also Mulungushi University chancellor, said when the mines started raising concerns on the challenges the proposed tax regime posed, Chikwanda and Yaluma should have made a quick decision in that direction for the sake of the economy.

He said the delay by Chikwanda and Yaluma to act on many concerns by the mines had hurt other economic fundamentals such as the kwacha.

The kwacha depreciated to the lowest levels to trade at K7.71 to a dollar by March 25, the weakest in the country’s history, largely attributed to the mineral royalty tax impasse.

President Lungu ordered Chikwanda and Yaluma to defer the 2015 tax regime that introduced mineral royalties as the final tax and explore the option of reverting to the double tier tax system.

“This directive was long overdue. It is music to my ears. I was not actually expecting the President to do it, but I thought the ministers [Chikwanda and Yaluma] themselves could have done that. But that it is coming from the President; I feel we can now move faster on this,” Prof Saasa said.

He said had the government engaged mining companies on the matter, it would not have taken this long to realize that there were challenges in implementing the new tax regime.

“This is what we have been campaigning for…the process needed more consultations, my recommendation, even to the Parliamentary committee on estimates, was that we continue using the double tier system as we explore other ways of taxation,” said Prof Saasa.

In January this year, the government implemented mineral royalty changes that jumped from six to 20 per cent for open cast mining and six to eight per cent for underground mining.

However, the mines rejected the new tax regime, citing profitability and operational challenges, preferring the old system that had both mineral royalty and corporation taxes.

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