Government will introduce a windfall tax on base metals at a minimum rate of 25 percent and increase mineral royalties to 3 percent from 0.6 percent, Finance Minister Ngandu Magande said on Friday.
Magande said during the 2008 budget presented in parliament that the new taxes would be effective from April 1, 2008.
“For copper, the windfall tax shall be 25 percent at the copper price of $2.50 per pound but below $3.00 per pound, 50 percent … for the next 50 cents increase in price and 75 percent … above $3.50 per pound,” Magande told parliament.
He gave no details of rates for other base metals.
Magande said the government would also reintroduce withholding tax on interest, royalties, management fees and payments to affiliates or sub-contractors in the mining sector at the rate of 15 percent.
“Effective 1st April … the corporate tax rate will be 30 percent, the mineral royalty rate on base metals will be 3 percent of gross value,” Magande said. Corporate tax was previously 25 percent.
He said the new taxes were aimed at ensuring Zambia benefited from its vast copper and cobalt mines, the country’s economic lifeblood.
The rise and introduction of some taxes is a direct response to complaints by the opposition, trade unions and civil society that Zambia was not getting enough benefits from its mineral resources.
Magande said the new revenue from the copper mines would allow the government to increase investments in education, health and other social sectors.
“These measures are competitive, reasonable and balanced. The expected additional revenues in 2008, as a result of these new measures are estimated at $415 million,” Magande said.
Magande said preliminary data showed copper output marginally rose to 523,435 tonnes last year versus 515,618 tonnes in 2006 while cobalt production declined by 9 percent to 4,229 tonnes from 4,648 tonnes in 2006.
Copper output was significantly below the 670,000 tonnes Zambia had forecast for 2007.
Magande gave no production forecast for 2008, but analysts have warned that production will be hampered by power shortages, which has already forced copper mines to reduce output.
Zambia’s national budget deficit was expected to widen to 3.2 percent of gross domestic product (GDP) in 2008 from 0.95 percent last year.
Magande said in his 2008 budget speech to parliament that the economy should grow by 7 percent this year after expanding by 6.2 percent in 2007.
He said inflation would average 7 percent in 2008 compared to an 8.9 percent average in 2007.
Download the full budget speech HERE
But for how long are we going to be told that govt will increase mineral royalties from 0.6 to 3 %..?
Increase in corporate tax will increase the cost of doing business in Zambia, Botswana currently charges 15% corporate tax…this will have a negative impact on the inflow of capital and hence efforts in combarting hunger and poverty will be minimal.
Yes we need to start benefiting from the high copper prices, as such we welcome the windfall tax as long as it will be implemented.
Why didn’t he mention the tax rates for other base metals like Cobalt? Like ba Mwine says, Increasing coporate Tax is not ideal for a country that is trying to attract more foreign investors. I hope they have worked out other attractive incentives that would subsidise the 30% corportae tax. The 3% mineral royalty rate is long overdue, Infact GVT should strive to have risen to 5% which is the generally acceptable minimum rate.
Well done. At long last. I hope it is not too late as there is more waiting until April!!
I feel their was need to revise PAYE as you earn downwards.We are still the most taxed people in the subregion
This is a good move by our government, but the problem we have in Zambia is implementation and financial management. Even if today we were given One billion USA dollars for an annual budget, how we utilse those funds is what matters most and is what will affect the quality of life Zambians lead. Yes, raise coorporate tax, but where do u take those funds, in making unnecesary portfolio offices!!! I was hoping the minister of finance would also tell us that the huge informal sector will also be
taxed, look at the housing sector, the moment govt withdrew payg house rentals for its officers, that was it, those landlords do not pay any tax to government, and yet we sit and watch living the few on payrols to pay through PAYE!!! Look at our huge informal sector, hey, that can increase at tax base and hopefully improve. It is a scandal for a country like Zambia with popn of 11million to be in poverty amidst riches!!!!!
why cant we Zambian entrepreneurs run our mines? why is it so hard for us to unite and invest our resources and ideas in projects that could improve the lives of our people? why is it so hard for us to unite? why?
I don’t understand
imagine
kcm 1 billions of benéfits:
if copper 3 $ 250M$
if copper 3,5$ 500M$
if copper 4 750M$
for the same bénéfits , the taxes are différents! ?
if copper is expensive KCM ( VEDANTA ) have no interest to produce in zambia but in another country
last Week magande announce taxes = 47%
I don’t understant is it a nw law?
KCM for exemple
if copper hight more than 4$/lb for exemple
no interest to invest more
you have 1000 with 75% KCM keep 250M$
if KCM invest 200 : 800with 75% oftaxe KCM KEEP 200M$
so minor can’t have best salaire and work condition !
these proposition is very intestinf if copper less than 3$/lb for KCM
1000 25% KCM keep 750!
to réalise 1000 mprove of production bad rémunation etc …
I think it s no good …
GRZ must win more but KCM also!
#9: What are you trying to say?
exemple KCM 100000t
cost of produce 1$/ lb
if the copper cost 3$/lb so 2$ bénéfit
taxe 25% : Grz win 0.5 / lb so 1100$/t so 110M$ for 100000t
KCM in this case wn 1,5/lb so 330M$
if the copper cost between 3 and 3,5 .
3,5 for exemple bénéfit 2,5
taxe 50% Grz win 1,25$/ so 270M$ id for KCM ( who loose 60M/ copper 3$/lb)
if the copper cost over 3,5 . for exemple 4 the benefit is 3$/lb
taxation 75% Grz win 2,25$/lb so 490M£
and KCM 0,75$/ lb 180M$
do you think KCM so VEDANTA accept this
more expensive is the copper … and bénéfit are less?
so no invest bad remuneration etc
and VED has interest to sell his copper when the price are low
VED make stock and keep copper and sell when copper is at 3 $
ok i have understand
with the news taxes zambia earn , win +25% if copper between 2.5and 3 etc
so zambia hope copper up !
now it’s clean
Steve, the official language in Zambia is English, please use it
Poverty: Interesting to note that the 19% reduction in urban poverty (from 53% to 34%) and 2% increase in rural poverty (from 78% to 80%)accounts for only 4% overall reduction in poverty. The challenge here is to reduce rural poverty, then we will see meaningful change. Since the rural economy is agro-based, it shows that the agricultural policies, if any, are not impacting on our rural folk
2007 Economic review: The Minister pointed out poor performance in the textile and leather industry and the rail transport sector. However, on interventions for 2008, these sectors have not been taken care of. What is the point of CSO churning out these statistics when the Government looks the other way?
VAT reduction: It is commendable that VAT has been reduced from 17.5% to 16%. That is more money in my pocket. But the question is how much? Let’s do the maths. If my monthly taxable grocery shopping is K1, 000,000, for example, the Government got K175,000 from me; now they will get K160, 000 – a difference of K15, 000! Only enough to buy me 3 extra bottles of Mosi — More money in my pocket indeed!!!
It is meaningless if the common man does not benefit from that.
Once again we are treated to mediocrity. Magande calls inefficiency “capacity constraints” and only tinkers with real reforms to PAYE and VAT.And he thinks he is the best Finance Minister since sliced bread!
Is this steve really serious with his English language skills? He sounds like a guy I know from DRC.
It about time! Like Fyapena I would like to see the benefits translated to the benefit of the poverty stricken Zambians in the form of better equipped hospitals and better pay for our healthcare personnel, better roads in the townships and towns, better markets-chisokone and New York markets in Kitwe and Chiwempala-Chigola are nightmares and potential problem areas for instance.
windfall taxes : Who is involved?
Does the Budget Office conduct periodical (quarterly or bi-annual) reviews of the budget implementation exercise? Every year, the Minister of Finance gives carefully worded and good sounding budget speeches, with equally palatable themes. But by the end of the year, the budget implementation sucks. I think there should be a watchdog, like the way the IMF periodically reviews the agreed-upon benchmarks with Government. Something that Magande, Chibiliti (Secretary to the Treasury)should look into