Proposed tax changes will make Zambia “un-investable’”
More tax regime instability, massive increases, and novel taxes not seen anywhere else in the world, will hurt the mining industry and all those who rely on its success, Zambia Chamber of Mines President Nathan Chishimba said after an emergency meeting of mining companies held on Wednesday.
“Having met as an industry, we are convinced that attracting investment is the only way to grow our economy, and growing our economy – and the base of taxpayers – is Zambia’s route to a prosperous future. To that end, we had a 10-point plan which we took to Government in July, in which we believed we could double the size of copper production, and add a billion dollars a year of fiscal revenue, over the next six years,” Mr Chishimba said.
“Unfortunately, our plan has been ignored. Instead, the raft of measures introduced will have exactly the opposite effect. A number of operations will be pushed into loss-making positions and will likely have to scale back.”
“Those already making losses will be pushed further into the red. And some of our members have had to immediately put on hold their expansion plans, which is the lifeblood of future production. Let us be clear, these higher tax rates will not result in more tax revenue. Quite the opposite. As industry production shrinks through the impact, there will be less jobs, less taxes and as a result there will be less in the government’s bank account for many years to come.”
Amongst the many changes, a few were singled out as being particularly harmful. These included:
Mineral Royalty rate increases
MRT rates have been increased by between 25% and 67% across the different price bands.
Zambia will now, once again, be an international outlier in the severity of its regime.
Non-deductibility of MRT
The Budget introduces a further feature to the MRT regime, which no other leading copper mining country applies. That is that MRT payments will no longer be deductible against Corporate Income Tax. This is in effect double taxation, and takes no account of the need for reinvestment in explorationand expansion.
Sales Tax
The Budget introduces the notion of a non-refundable Sales Tax, in replacement of VAT, without providing any detail whatsoever. Quite apart from the non-refundable aspect which will severely impact cost of mining, the financial uncertainty is so great that banks are now unwilling to provide financing to all miners, big and small, without further clarity.
15% Export Duty
The export duties that are intended to be applied to gold and gemstones will hit emerging and established operations alike. In fact, they will have the effect of putting legitimate operators, many of whom are Zambians, out of business.
Import levy on copper and cobalt concentrates
The introduction of an import duty on concentrates, combined with sales tax, will render imports uneconomic, and partially shutdown the Copperbelt’s smelters and refineries. This initiative flies in the face of the government’s beneficiation drive, and in one strike, destroys the potential for Zambia to become a Southern African value-addition hub.
Restriction of tax credit for interest at 30% of EBITDA
This initiative has the effect of stringently penalising any company that has borrowed funds to invest in operations. Not only does this dramatically increase the cost of borrowing for any business, but it completely disincentivizes the entrepreneurial risk taking necessary to start new businesses.
“Some people will regard these increases as a great windfall for Zambia. But bear in mind that no operation will mine, explore or invest under those circumstances. The returns are simply not worth the risks inherent in mining. So, far from being a feast, this Budget will lead to famine,” said Mr Chishimba.
Mr Chishimba also highlighted the effect that these changes would have in the wider economy. “Many people do not fully appreciate the economic contribution the industry makes in Zambia. All large mines in Zambia have a multiplier effect of at least three – which means for every person working on the mines, there are at least three more jobs created in the wider economy just by the fact of the mines’ huge presence. We are talking about hundreds of thousands of household dependants. What will happen to these people? What will happen to our suppliers as they have to scale down? What will happen to those who supply us with power, for instance, if there is no longer demand?”
“We are on the precipice of a deadly spiral damaging our country, our reputation, our communities and our people that could take many, many long years to repair. We urge the government to open their door to us, to permit us to re-engage with them on these measures.”
Nathan Chishimba is right ,GRZ unwisely keeps milking and overburdening an unhealthy emaciated cow…you’ll end up losing everything.
This is a wake up call. The mines are attempting to put the nations economy at a gunpoint. This is time for our economy to really wake up. We need to jump start other sectors. We need to leave our drug dependency on mining. The govt should remove all taxes and reduce on regulation of SMEs to Jump start that sector so as to reduce on unemployment that together with agricultural production must be further supported with zero tax rates on all agricultural start up businesses. For those familiar with the fundamentals of Adam Smith Economics and the ‘Wealth of Nations’ at the centre of all economic activity are the businesses/ firms and agricultural production. One of the oldest stock exchanges in the world is the CME Chicago Mercantile Exchange this exchange dealt mostly in agriculture…
Ctn…One of the oldest stock exchanges in the world is the CME Chicago Mercantile Exchange this exchange dealt mostly in agriculture produce. The major economies of the world developed from agriculture. The USA from cotton and sugar grown in slave plantations that were exported to Europe in the 18th century, to India supplying textiles, spices, tea, China with its massive rice production as well as textile industry. Of course these economies diverted into manufacturing but at their inception agricultural production played the main role on jump starting their economies. But back to the mines attempt to hold Zambia hostage, they are being very unfair- these guys have enjoyed for too long so many perks made so much profits and we as a nation have nothing to show for it
Even HH someone who…
Which emaciated cow are you referring to? The only industry worth talking about in Zambia is trade kings the producers of boom detergent
Glad someone in our country is still objective! Thanks bwana Chishimba. I couldn’t agree with you more.
Agree with what? For fear of losing investors you want to continue selling out copper below value by keeping royalties low? No! This too, Chishimba must frankly admit, is not seen anywhere else in the world.
Let’s wait and see how many investors will pull out – if anything their production will increase and this is the perfect time to increase mining taxes also because forecasts show that copper demand is set to soar continously due to production of electric vehicles, transition to green-energy, construction industry and many others.
Such statements like “we are convinced that attracting investment is the only way to grow our economy, and the base of taxpayers is Zambia’s route to a prosperous future” only testify of lack of ideas and national incompetence when it comes to…
…when it comes to managing our resources.
This narrow mindedness, cluelessness and desperation exhibited by this so-called “Chamber of Mines”is really disturbing. No wonder their ka 10-point plan was ignored by government because they only think one-way, all their decisions are influenced by the fear of losing foreign investors.
I advise ba Chishimba to travel to West Africa and see how Nigerians and Ghanaians have a better grip on their national resources. They know that the cocoa and the oil will stays in the ground forever, it will not rot but investors will come and go.
The Chamber of Mines should be realistic in its quest to make huge profits at the expense of the Nation.I do not follow Mr Chishimba,s logic when he says some Mines are operating at a Loss.The question begging an answer is for how long have these Mines been operating at a loss without them closing down?Any business that continuously operates at a loss is not worth being in existence.The 2019 Budget is spot on and the Finance Minister should not listen to detractors in implementing it.
Prophets of doom! Let’s roll Zambia! He is UNELECTABLE!
A bunch of morons wanting to continue milking the smart people of the Zambian Enterprise while enjoying transfer pricing and usurping our cash through VAT refunds on inflated operational imports.
Those hay days are over because we run this country and saw you exactly for what you were declaring losses consistently to evade taxes among other things.
Margaret now need to even tighten the remaining loose end by issuing an SI mandating that all copper sales will be FOB Lusaka so that all foreign currency earned on all sales are deposited directly at the Bank of Zambia to increase our foreign exchange holdings and stop the artificial slide of the Kwacha.
And if you morons like Nathan are not ready to dance with us, how about we just nationalize the mines. What say you then???
A…
Continued …
And if you morons like Nathan are not ready to dance with us, how about we just nationalize the mines. What say you then???
A fellow smart Accountant by the name of Margaret is in charge now and all forensic audits have exposed your skimming … its over just pay up or give up and IDC can run these mines the best way we always did under KK.
You want to be profitable??? Send all your inexperienced expatriates back to their count of origin because they are your largest expense on payroll.
The smart people of the Zambian Enterprise are capable of doing a far much better job than 99.9999% of your expatriate pool. Most of those expatriate kids were sucking from their mother’s titters when ZCCM was the world’s largest conglomerate better yet others were not even born…
Continued…
The smart people of the Zambian Enterprise are capable of doing a far much better job than 99.9999% of your expatriate pool. Most of those expatriate kids were sucking from their mother’s titters when ZCCM was the world’s largest conglomerate better yet others were not even born yet.
We have been in the mining business since the 1,800s and have very little to show until 1973 when we took the reigns and did great things for ourselves.
Now we have this unpatriotic moron Nathan giving us a lecture … Give me a break and kiss my a$sss!!!
THE OWNERS OF THE MINES WHICH DOUBLE H SOLD WITH HUGE KICKBACKS ARE NOW VOICING OUT. THROUGH THE MOST UNLIKELY SPOKESPERSON. IT IS HIGH TIME GOVERNMENT HEARD. THIS IS THE CARD THAT THEY HAVE ALWAYS PULLED AND GOVERNMENTS HAVE ALWAYS BOWED. ZAMBIA GETS MILKED AND MILKED AND MILKED.
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Ka Chishimba what
“put on hold their expansion plans, which is the lifeblood of future production.”?
Incredible. Big guys don’t want to pay taxes. Are we paying taxes for these chaps? Is mwanakatwe going to twist under pressure? Let’s wait and see.
Ctn…Even HH someone who in the past has had ties with Glencore and had many questionable dealings with other big mining conglomerates firms such as Anglo America said its good that the govt will get harder on taxing the mines because at the end of the day we are all Zambians. Let the mines not try to intimidate us as we know that ‘copper is the new gold’ as echoed by Lubinda Habazooka last week. Yet I remind my fellow commentators that have been around longer on this site that it was infact myself who made that statement about 2 years ago and I received several insults from the likes of ‘jay jay’ a dull cretin of a blogger known to contradict itself on an hourly basis. Once again back to the issue at hand. Let us truelly diversify and actually do it not just talk it.
Zambia’s economic backbone is already broken and its on life support.The IMF ,Fitch ratings agency and Zambia’s economic indicators suggest that too.
GRZ HAS RESORTED TO FIRST AID TACTICS, ZAMBIA NEED PROPER LONG TERM HEALING POLICIES TO REVERSE SEVEN YEARS OF MISMANAGEMENT. i SUPPORT THE CHAMBER OF MINES REASONING…THEY ARE MORE CONVINCING THAN WHAT GRZ IS PUTTING UP.
In a Proper functioning Economy Ministry of Finance should have held Pre-Budget Meetings with the Chamber of Mines. Taxing Mines arbitrarily will lead to loss making and Mining closures with ripple effects to the rest of the Economy. Ministry of Finance should listen to the Miners’ concerns b4 disaster strikes. The writing is on the Wall.
They did hold these meetings and i remember attending one. Some facets of our country find more glory in the solace of complaining, and not in the humbleness of making a private positive contribution. Who are you trying to preach to in this here instance? The budget is already passed and when have you ever heard a budget rescinded in human history? Even Sata, the chief reverser of SIs, could not reverse a budget already passed. Be proactive and do things inadvance. Zikomo
Crooked I: Now you will feel the full power of the mines; hope you are that strong to manage them. Am not negative; I just want you to know that the mines have held us by our balls and you should be man enough to endure the pain of their squeezing. If ready for this, well and good!
$17 billion debt and not a cent on re training and re skilling the millions of unemployed on manufacturing and factory skills….Now most manufacturing wannbe investores can not find the right skilled Zambians….
We know of a Chinese textile manufacturer who wanted to set up shop in Zambia to take advantage of the tariff free concessions offered by some western countries of African made textiles , there was no machinists in the country to open up a plant….
We only have roads to rip apart mother zambia of her God endowed wealth by crooks , which is exported raw….
Regarding introduction of sales tax to replace VAT, the argument that the country does not have a developed manufacturing sector is problematic. It is problematic because VAT is operating in countries in the same category as this country. Above all, the USA where ST is applied does possess huge manufacturing capacities. In addition, manufacturing needs to be grown. In short, industrialization needs certain common fundamentals with other countries, VAT being one of them. There is no need to blame the goal keeper. Late refunds does not pose a permanent challenge. They will disappear as soon as debts are reduced further. Even disturbing shopping malls is not necessary. Shopping malls make business sense for ease of creating favorable retail outlets. What is needed is re-training local…
Even disturbing shopping malls is not necessary. Shopping malls make business sense for ease of creating favorable retail outlets. What is needed is re-training local producers to achieve Quality and Quantity.
Mwabombeni batata ba Lungu Mwabombeni! You are even failing to dialogue with the Mines on their 10 point plan! Did you even look at it? Arrogance and Pride goes before the fall. Mwabombeni Pali Dununa Reverse …kikikiki 2019 to 2030 will be very tough for ordinary Zambians because of Recklessness by a few greedy good for nothing nitwits!
So what’s the point of having the mines if the country can’t benefit. Just as an observation why is it that the Chinese owned NFC mine in Chambeshi have not been complaining like Mopani even after 20 years since they bought the mine?
Everyone wants to protect his/interest
This guy is paid by his masters to espouse such rhetoric. It dates back to the era when he studied in Scotland….That bastion of capitalism/exploitation/European supremacy
I am a believer in a laisser faire free market economy, but it’s these arm-twisting tactics of these mining companies that may make me agree with Lubinda Haabazoka’s advocacy of the nationalization of the mines. It has now become a mantra after every budget speech for the mining companies to threaten us with withdrawal of investments, job cuts, etc. There has never been a budget which these companies have ever found favourable with their operations. We have generations of highly experienced Zambian mining experts who served in senior capacities in these mines. Why don’t they form a consortium of experts, form a Zambian mining company and attract equity partner(s) to take over these mines in the event that these blackmailers actually withdrew their investments?
“Africa Confidential announces that donor money has disappeared in a corruption scandal and aid will be withdrawn. The Minister of Information, Dora Siliya, responds with great indignation saying the story is entirely untrue and a smear campaign against the country by Western interests, as aided by their local agents. Not much later, a tweet from the British High Commissioner lets the nation know that donor money has indeed gone walkabout. Then there is a flurry of admissions, firings and anti-corruption utterings in government.”
“Rumors fly that fuel prices are about to go up. The ERB spokesperson goes on Radio, and like Ms Siliya before him, cluck clucks about malicious rumors that should not be bothered about. He assures the nation that there is absolutely no plan to raise fuel prices. A few days later, there is a pointless-in-the-larger- scheme-of-things panic buying of fuel before midnight, as prices have been hiked by the biggest margin anyone can remember.”
So, the question is, how will a government that lies so often and so blatantly get the public to believe it, when it is absolutely vital that it is believed? Simply, when Dora Siliya, Amos Chanda and Sunday Chanda shout “sheep sheep come home, there is no lion” – how will they get the public to come running? If, one day, a false but dangerous rumor makes the rounds, one that leads to unrest, or to self harming practices, maybe around public health – how will those who speak for government be believed on a day they are actually telling the truth and being believed is the difference between aversion of a crisis and a dark place?
You PF supporters here, you have to know that something is very wrong with your mental faculties when you find yourselves on the same side as deranged Sharon. Please grow brains and try objectivity. This licking of dull Lungu’s boots is not helping the country in any form whatsoever.
On the topic of the transfers of social cash for poor in part provided by some donners , the European commission office and the USA are worried that such cash donations for the poor are infact entrenching China’s grip on Africa because those funds are being used as campain tools to keep incumbants in power who are infact Chinese stooges….
The misuse of funds was only an excuse up pull the plug…that is why PF called their bluff and replaced the missing funds….
The West are now of the opinion that China is benefiting the most from African wealth, so China must fund the poor….
Well, others didn’t openly show their hand but the British did, duh!! British High Commission has to understand that you don’t win by inciting foreign masses.
Oh my Britain, America created us and we should not interact with other nations especially the Chinese. What a wonderful world where more than fifty years of freedom you still worship your those who enslaved you. You have tried to perfect your democracy but they still interfere so that you continue to live in a confused stupor. 50 years and all you can boast of is producing orators who make money out of you.
The mines have for far too long taken Zambia for granted; to the extent of forcing to have electricity rates lower than for domestic consumers. When you look at sector contribution to GDP, you’ll begin to wonder on what basis the mining sector is deemed at the backbone of the Zambian economy as it contributes less than half what the wholesale & retail sector contributes. We need a shift in mindset regarding our priorities economically and wake up to the reality that unless we resolve to look within ourselves and embrace sacrifice, hard work, and support for one another, we’re doomed!
That is true….the mines need to be taxed more , but it does not help when these same mines are major contributers to campain funds for pf , who then sign anything…
In the current climate of USA v China’s 2025 bid to become a high-tech supper power and world leader, any western donations to Africas poor is seen to benefit only the chinises as those same poor now vote for pro chinise regimes into power….or vote to keep them in power..
This is like you sponsoring your poor neighbours children who only go on to work for your competitor….
What have the mines benefited the people of Zambia with or without any tax. Since those ten point or whatever plan was introduced or given to the Government, How much has the government earned from the government. And bwana do you want to tell us that in the life of the Zambian mines there has never been an addition to the fiscal whatever you are talking about and this will only happen now with the introduction of your ten point plan?
How long has the Chamber of mines been there? What advice have you given before so that Zambia should benefit from its mines. Your only duty is to appear when something is said that seems to be negative to the mines. Those calculations you are giving, people are tired of being given figures that solve nothing.
We have had a lot about these mine issues…
Mr Nathan Chishimba can talk like this because he is paid handsomely by his employers Lumwana mine as such has an obligation to defend his salary at the expense of the majority zambians.
But him and his friends are mere mouth pieces for those mine owners who are exploiting our minerals without giving this country a fair share of its own resources.
Those mines would not be operating in this country if they were making losses. Stop those cheap lies.
Infact a lot of people feel it is time the government increased its shareholding in the mines to 50% and get to be actively involved in the affairs or our core income earner so that those under declarations or concealments are averted.
Our government should not be borrowing money from donors when we have the resources that we just have to…
What do you expect from turncoats like Nathan Chishimba who benefits heavily from the mines.The traitor buys everyone beers at Water Works Plaza.He even plotted the appointed of Grace as corporate manager for Lumwana Mine when her professional is forestry just bcoz he bonks her.They even club together like at the Lounge in Northmead and that ka ugly chick Grace, I hear miners from Lumwana complain that she has been using bottom power with the bazungus throughout her career to rise.
…..”MRT rates have been increased by between 25% and 67% across the different price bands”….
These percentage increments were calculated in relative terms……can Mr Chsihimba tell us what the actual mineral royalty rates (was) were on all the five classified mineral categories under ZRA and how much they have been asked(proposed) to pay in the new budget and it will be easier to compute the difference between the old mineral royalty rate and the proposed one.As regards the removal of VAT system and repalacing it with Sales tax,it is the most efficient way of taxing the mines since there are no tangible backward and forward linkages the mines are creating owing to their preference to exporting base metals as opposed to adding value to these base metals.The govt should not back…
The govt should not back down!
My understanding on VAT as it relates to the mines is that they end up with refunds because they are charged it (on local products and imports) whereas they export almost all the copper abroad. And, unfortunately that is what VAT does. The VAT refunds are compensated for through higher profits from which the Government earns more income tax. Changing from VAT to sales tax will not necessarily increase the total tax collected as income tax will reduce whilst sales tax/VAT will increase. The mines need not overstate this one. The real victims of this change are the consumers i.e. the common man. The best solution would have been to move major exporters (e.g. mines) to a sales tax regime and leave local producers on the VAT system.
So MUCH MOANING FROM THE MINES!! For ONCE CAN WE HOLD ON AND SEE WHAT THEY WILL DO?? In DRC , just a few months ago, Kabila slapped even higher taxes, they complained, moaned and threatened but DRC never moved an inch to change any taxes, the mines are still there operating!! IN OUR CASE LET US STICK TO OUR GUNS AND ASK ANY ONE WHO WANTS TO SCALE BACK TO ALSO STAY OPEN TO TAKE OVER BY GRZ WITH THE OPTION OF FINDING PARTNERS FOR JOINT VENTURE RUNNING OF SOME MINES!! Like Dr. Habazooka said, these mines know that copper and cobalt are the next big things so they want the tax regime to stay low to their sole advantage! A few weeks ago Kabila was telling youths in DRC that the expected boom in electric cars should see DRC transforming a good percentage of copper and cobalt at home to maximise…
These are same us-less Zambians we have in the country.We need sales tax period.Why should we attract thieves in the country?
These are chaps who can sell the coutry for the sake of Hilux.Mines should contribute more.Why don’t they keep dollas in Zambia?
1.They don’t keep the money in the country
2.They invade tax
3.The operation money is also not known and kept in europe.
The country doesn’t need such corrupt individuals like Chishimba to comment.Never even give this chishimba fora to talk coz he is paid by the same mines.Ukutupa uko let the mines pay money.Zambia is suffering bcoz of begging for mines which add nothing to the economy.Let us close them and get a loan from china and start mining on our own.Zambia taught chile mining.why should we fail now?
Right. The issue should not be about partisan politics. Even the opposition know that government cannot function fully without contributions from the mines. Anyone who thinks otherwise must tell us how he will fund our budget. The numerous taxes we are subjected can only contribute a drop in the ocean.
Zambians should not listen to Chishimba. He lives on pay from these Mines he so vehemently protects. Where does this guy come from? This guys has no heart for this Country. he is busy lying about the taxes.
1. Mineral Royalty taxes have been increased as follows; He chose to convert figures to confuse ordinary people
– When copper price is less than USD4500 tax is 6% increased from 4%
– When copper price is better at USD4500 to USD6000 tax is 7% increased from 5%
– When copper price is much better at USD6001 to USD7500 tax is 8% increased from 6%
– When copper price is booming above USD7500 tax is 10%
2. Abolished VAT to be replaced with Sales Tax
There is no change here but simply a change to an easier method where there is refund on the consumption tax.
3. Export…
This is the way Mr Chishimba was suppose to express the changes(and don’t even call them increments) in Mineral Royalty Tax rates and not that deliberate ploy mean’t to mislead people in relative percentage terms.This infact,is a progressive tax for it accomodates mines both in bad(when the prices of copper are less than $4500) and good(when the copper prices are between $6001-$7500) times.It also has a windfall tax when copper market is in a boom.
My brother Mr Chishimba, the reason why mining companies are in existence is to mine. If they want to relocate or stop exploration then they are defeating their very existence, mining. Coming to your point the mines are busy transporting the mineral to wherever they ship them to using roads build out of the PAYE collected from a poor man while they finance there production using loans from sister companies charging exorbitant interest rates which swallow up all the taxable profits. This the criminality going on in the mines my brother so I say if they want to leave let them leave after all it preservation of our copper for future generation who might be better negotiators than the mess we have caused our selves. Bravo 30 % maximum interest deductibility.
Please don’t kill the goose that lays the golden egg.
I am made to believe that Zambia is the largest mental hospital in the world. You have been making noise about little taxes coming from the mines especially KCM and Mopani. Today boma increases tax ati the country will become uninvesbless. Really??? For how long did Chilanga stole from us hiding in dollar thing and high operational costs? When Dangote begun business in 2015 that was the time dollar was at K14 and cement was at k55 when Chilanga was selling at k100 and when Dangote opened its gets, Chilanga too rediced pricespecially of cement. Why didn’t they pull out? This miners they know how much they steal from you and they will not go. Problem you pretend as if you are doing the job and yet you are paid to speak for the same infestors. Rubbish
learned comrades, how many of you were working when KK took over running of the mines and can remember what became of the mines in the late 1999. Government kept borrowing monies to keep the mines going after the mines started making losses due to government diverting money (profits from mines) to loss making parastatals and UNIP conferences instead of reinvesting, When the mines started straggling due to lack of funds the World bank/IMF forced the government to sell of the mines.The current crop of leaders in government can not manage the mining conglomerate. remember Francis Kaunda was tamed by KK and all his loyalty was to KK. what ever we told me to be priority in running the mines was secondary.
Look at Kingsley Chanda at ZRA, his children go to the most expensive school in…