President Edgar Lungu

New mineral tax under review

Government is to review the mineral tax, if possible defer the implementation of the controversial 2015 increase.

President Lungu ha since directed the ministries of Finance and Mines respectively to ensure changes are effected by April 8 to forestall a possible crisis in the mining sector.

Last year mineral tax was increased from three to eight percent for underground mining and six to 20 percent for open pit operations, a move which mining companies in the country have vehemently opposed, citing falling copper prices as  the reason.

“I have therefore directed the Minister of Finance and the Minister of Mines, Energy and Water Development to review the mining tax regime and make recommendations to Cabinet by 8 the April 2015,” local media  quoted the president.

Mr Lungu said after receiving submissions from mining companies and the Chamber of mines  on the possible effects of the new tax, he had written to Finance Minister Alexander Chikwanda and his Mines counterpart Christopher Yaluma to review and submit recommendation to cabinet by 8the April.

It is not clear whether the review meant reducing or withdrawing the tax as companies have been demanding.

But among the options the President has asked the ministers to consider, are the following:

  • Status quo but negotiate interim fiscal arrangements for operations that are most affected on a case-by-case basis;
  • Identifying potential legal or regulatory modifications to the existing
    2015 fiscal regime that could be readily passed and implemented;
  • Defer implementation of the 2015 fiscal regime, and
  • Temporary reinstate the 2014 fiscal regime as a more amicable regime is negotiated.

Last December proposed the increase which parliament ratified in January affecting the increases immediately.

There has been an uproar among mine owners in Zambia such that firms like the Canadian multinational Barrick Gold Corporation has threatened to pull out operations from Lumwana, Solwezi, the taxes are not withdrawn by end of March.

While government has been insisting that the new increases were vital to boost mineral revenues, mine companies say the timing was wrong as copper prices have been dropping at the world market.

In the latest turn of events, the president noted.

“Obviously the mining industry has been affected by copper prices on the international market. It is clear that this unfavourable economic trend globally has been mainly on account of weak global demand for copper,” the Head of State said.

“I wish to take this opportunity to reiterate my government’s resolve to continue putting dialogue at the centre of our governance systems. Dialogue between my government and the mines shall continue.”

The government had earlier in the year replaced the 30 percent corporate tax, which it indicated many firms except two had evaded, with mineral royalty tax.

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