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Thursday, August 11, 2022

Mines Royalty tax is final – Chikwanda

Economy Mines Royalty tax is final – Chikwanda

Finance Minister Alexander Chikwanda delivering the 2015 budget
Finance Minister Alexander Chikwanda delivering the 2015 budget

GOVERNMENT says the current mineral royalty tax is final and it will not go back on its word.

Minister of Finance Alexander Chikwanda said the new mineral regime is a fair route and makes it simple for the Zambia Revenue Authority (ZRA) and the mines to plan.

Mr Chikwanda said this in Lusaka yesterday when he received a K219 million dividend cheque from Zambia Consolidated Copper Mines (ZCCM) Investments Holdings.

“The new mining taxation structure is final. We changed from the corporate profit tax because it was elusory and only two companies paid,” he said.

Mr Chikwanda said the mining taxation has been left for ZRA to administer and Government will not give the authority instructions on how to implement it.

He said Government is off-loading 27 percent of its shareholding in ZCCM to the public.
He urged ZCCM to look for an international market if it cannot find any locally.

Mr Chikwanda said the shareholding of state enterprises, such as ZCCM will this year be moved from the Ministry of Finance to the Industrial Development Corporation (IDC), which will become fully operational this year.

He said ZCCM’s incorporation under the IDC is critical since it is listed on the stock exchange in Lusaka and London.

“We want ZCCM to have a much greater meaningful participation in mining other than holding shares,” Mr Chikwanda said.

Speaking earlier, ZCCM chief executive officer Pius Kasolo said he is delighted to have presented the first ever dividend cheque to Government, the majority shareholder .

And the Council of Churches in Zambia (CCZ) has advised Government to prioritise the interests of Zambians as it dialogues with mining companies over the mineral royalty tax.

CCZ general secretary Suzanne Matale said in a letter dated January 9 that Government should safeguard the interests of Zambians by ensuring that there is responsible investment in the mining industry.

26 COMMENTS

  1. The collapse in copper price will lead to extensive collateral damage in Zambia. Mines like Mufulira, Chibuluma and Konkola should be very tenuous. WATCH THIS SPACE GUYS!

    • Any investor who wants to leave is free to do so. Anglo American is on the waiting list, but they should stop sponsoring HH. HH will never be president of Zambia

  2. An opportunity has presented itself. Any businessman worth his salt can take a bite at this time and retire msanga msanga. Don’t say I did not tell you. It is an opportunity such as this that gave HH a little more pocket change than his haters.

    Don’t let muzungus grab this oportunity. Rise to the occasion imwe bonse a pull him down (PHDs).

    Vi banthu va kalijo!

  3. I second the sentiments made by Rev Suzzana Matale on the govt to priotise Zambians in their negotiations with mining houses on tax. Zambians should really come first and investors shouldn’t hold us on ransom. We shouldn’t be told on what to do and if they can’t dance to the zambian beat for now, we’re willing to sacrifice so that reasonable and genuine investors come forward. Its Zambian time and One Edgar Lungu is going to continue on this path……

  4. Nothing wrong with mineral royalty tax, it is the rate that is at issue here.
    And when I hear about this Industrial Development Corporation, a chill runs down my spine. Exactly what KK took us through. Presented as a noble industrialisation strategy, but in effect it is the same ZCCM and INDECO and ZIMCO sysndrome where certain families had the priviledge of producing all the managers, or you had to demonstrate that you are a staunch party cadre. The organisations were not run on business principles and yet they were supposed to be business enterprises. Just start compiling a list of the managers appointed to current or future state owned enterprises and you will know what I am talking about.

    • @Chief Economist. your analysis is too much everywhere. The rate is fair in the sense that these companies are not going to be paying corporation tax which is at 35%. If i ask you what is higher between 20% and 35%? The level of transfer pricing and use of futures in the mining sector has reached alarming levels to an extent that mines in zambia have the highest output by revenue but contribute only less than 3% to GDP. this is an abnomality by any use of any financial analysis available.

    • @ Haleisa Halelanda
      Chief economist is right. see 20% charge against gross revenue while benefiting Zambia, may not realise a desired return on the part of the investor. If cost of capital is higher than the rate of return, the issue of opportunity cost comes into play; investor may look at alternative projects, with lower risks and higher returns to invest his money and abandon our mines; we loss FDI. The 35% corporate tax is useless and can be evaded by simply reporting nil profits or losses. Thus equity has be provided in the rate of royalty charged to provide a win-win situation for Zambians and investors alike.

    • @Alfred.. 20% is a fair charge and especially on gross. this is because it takes care of all methods of creative accounting. No one was paying tax , each year there was a tax loss reported. Strictly speaking, if these companies were making losses they would have left after continually reporting losses for 3years! When you are dealing with a wasting asset like Copper, you do not play hide and seek and hoping to reap some day in the future. The rule to any business is to maximize profits and minimize costs, this simply means that if a businsess man had their way they would prefer not to pay any tax. The thumb rule is ‘legislate,dont negotiate’ if you get time google this paper ‘Discussion Paper Capturing Mineral revenues in Zambia: Past Trends and Future Prospects’

    • @ Haleisa
      Your point is valid only you are not understanding opportunity costs as applied to investment decisions. As long as Zambia is dependant on FDI, of which most emerging economies are, there is completing alternative project destinations that may have lower risks and higher returns on investments. Am sure if you are an investor you will choose alternatives that have high returns and lower risks; being like most investors, risk averse. this is basically what Barrick Gold is insinuating; They have alternatives with higher returns. Thats why we have to engage them and reach a rate that’s win-win and preserve jobs and other accrued economic benefits.

    • @Alfred? what would be ‘equitable’ to you? Zambia need to realise its muscle as far as copper production in the world is concerned. we are not some small producer , we are big. the same over dependence on FDI is what make us vulnerable. Lumwana has invested too much in zambia to just wake up and leave. besides the chinese despite all their poor safety record are ready to run these mines beccause they need the copper even more. Lumwana was suppose to close on Jan 5 accornding to their memo. the fact that they are still around says much, besides we have been there when Levy introduced windfall tax. The mines kept saying they are closing for three years singing the same song.

  5. So the government is not negotiating with the Mines then? So Miners jobs remain at risk then? So Lumwana will shut down after all?

    But why is the acting President and his ministers telling us otherwise? I hope that Edgar will pump some sense into these anti-business Tsars if he is the one that gets elected next week. He looks a little more sober and more business-friendly than these soviet style leaders. If it will be HH, he looks friendly to modern economic principles of creating jobs, but who knows with these Zambian politicians!

    • True. But Chiluba was friendly to mining investors too. so was Mwanawasa. But business is business. Friendly, yes, but resolute. Otherwise we will be making more countries richer like we’ve always done, and us poorer and poorer, yet we possess the raw mineral.

  6. I like this stance, its good for Zambia. who does not know Africa is now where raw materials are and we need to benefit as well. If the mine owners leave the Chinese are waiting to step in any time and are user friendly and this time around they have the money and the technology

  7. Royalty tax is a must. But its the methodology of its implementation that is the issue here. Royalty Tax is based on usage not profits; thus it becomes a charge to gross revenue. The question now is what rate should be applicable to maximise benefits for Zambians and provide a return on investment higher or equal to opportunity cost. in other words, while Zambia benefits, the investor must also get a return equal or higher if he were to put his money in the next best alternative. Mining being capital intensive and dependant on favourable flow of FDI, needs a balanced and level headed approach in implementing the appropriate fiscal policy; This is the point AC is missing by imposing the single tier revised mining tax based on mineral royalties only. Can we do without FDI?

  8. This is the most irresponsible statement ever issued by any Minister of Finance. UPND government will overrule this and appoint Mr. Magande Finance Minister and Mr. Gary Nkomo the Minister of Mines to resolve this to the satisfaction of Barrick Gold, Mopani, FQM and KCM.

    • @kakoma under the tree, I agree with you that the statement from the Minister is confrontational and somewhat outlandish but the job of any Minister is not to please Glencor,Barrick or any mining house at the expense of the Zambian masses. What is important is dialogue and not threats from either side. These mining houses have tricked us for quite sometime;they made their investment plans based on prices as low at US$2,000 per tonne of copper but the commodity’s price has more than tripled and still insist on making losses!! They cried against; windfall tax, minor revision of mineral royalty tax from 3% to 6%,removal of fuel subsidies,withheld VAT refunds due to lack of documentation and now threatening to close mines before they present proven counter arguments to governments decisions!

  9. Hats off to the MOF . Such decisions are good to the wellbeing of mother Zambia. If the investors don’t comply to our conditions let them go and don’t give the mines to other investors but lets run them ourselves as Zambia.
    I’m very disappointed that none of the 11 aspiring presidential candidate has so far mentioned of involving the government to start running some of these assets .Residue income of taxes is not enough. At 50 years we are capable to start running these mines.

    • PF carders awe sure! My friend how can this government run these complicated mines when its failing to manage our small scale farmers? You PF carders do you think with your brains or with your asses?

  10. I like the PF. These guys are seriously patriotic. Do not reverse even if HH and other visionless opposition leaders go parroting MNC songs. The multinational corporations have taken us for a ride for too long. Copper taibola. If we cannot get a fair share now, our future generation will come and mine it. Let them pack their bags and scram if they so wish, but also Minister, put your foot down and refund them their VAT

  11. Today you say the new mining taxation structure is final. When the mines say they will close shop and dismiss workers you say, come let us talk and no Zambian will lose their job… What should the workers take?…. Ati copper taibola, BUT the workers want to eat today!

  12. Yes the government needs more revenue to invest in development and provision of social services. But the government can achieve the same thing by reducing its own wasteful expenditure. The politicians here are just playing and pandering to the gallery with their populist statements, yes populist for that is what they are. Now have you heard government ministers talk about running their country more efficiently, smaller government, less pecks for themselves, live less like small kings, the things that save money? Look at their corruption fights, successive politicians just pay lip service to this this important area. I bet this country could make more money from reducing corruption than from all taxes combined including personal income tax.

  13. The sooner this STUP!D dinosaur is fired the sooner Zambians will get more jobs.

    This old UNIP brain failed the Nation once before, now he is trying to do in again.

    If his salary was tied to the profits and taxes Zambia gets from the mines it would be a different story. But he gets paid even if the mines go bankrupt and close down.

    He will soon wake up and smell the coffee just the same as he did with his reversed SIs.

  14. Why do we feel sorry for these investors? Have they ever felt sorry when extracting minerals from our soil. Our so called “Friendliness” (corrupt individuals) have costed us billions for years. Wake up Zambia and grow some guts for once! Think about feeding our own people for once.

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