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Alba Iulia
Thursday, July 9, 2020

Zambia mining firms say mineral royalties should be capped at 7.5%

Headlines Zambia mining firms say mineral royalties should be capped at 7.5%

Reuters reports that Zambia should keep mineral royalties capped at 7.5% in the 2020 budget to safeguard the health of the mining sector and promote additional investment, the Chamber of Mines said on Tuesday.

The mining body said in proposals submitted to the finance ministry that the 2019 mining tax regime had raised the tax burden on mines to unsustainable and uncompetitive levels.

Africa’s No.2 copper producer increased its sliding scale for royalties of 4 to 6% by 1.5 percentage points and introduced a new 10% tax when the price of copper exceeds $7,500 per tonne.

The scale is adjusted so that royalties are paid at higher levels as commodity prices climb and are reduced as prices fall.

“If the 1.5% increment on each band of the sliding scale is to be maintained, the maximum rate should be capped at 7.5%, for an LME copper price equaling or exceeding US$7,500/tonne,” the Chamber of Mines said.

The mineral royalty tax should also be tax-deductible for mining firms as making it non-deductible as Zambia does amounts to taxation on revenue not received, it said.

“Zambia is the only mining jurisdiction not allowing a deduction for these costs,” it said.

The Chamber said a proposed switch to a non-refundable sales tax from a refundable value-added tax should be delayed for at least two years until it is refined.

It also urged a waiver on import duty on copper and cobalt concentrates, saying Zambia has excess smelting capacity which should not be forfeited to competing neighboring states.
Zambia should also keep mining energy tariff increases in step with inflation over the next three years until a cost of service study is completed and a new tariff plan agreed with industry, it said.

A ministry of finance spokesman was not immediately available for comment.

Foreign Mining companies operating in Zambia include First Quantum Minerals, Barrick Gold and Glencore.

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  1. From a mining industry point of view this is a proposal which can be achieved by the Govt. In short studies have demonstrated the impact of these changes, I have done some. A delay, with minimum adjustments should be promoted to save the industry. This is because the system is not ready and may just end up shocking the economic fabric further. A year is already lost in the confusion and we can’t afford another year of uncertainty.

  2. “The scale is adjusted so that royalties are paid at higher levels as commodity prices climb and are reduced as prices fall.”

    This is what windfall tax means.When there is a winfall(higher prices) you impose a windfall tax and when there is no windfall( i.e normal or lower prices),let the appropriate taxes be paid.You cant impose a windfall tax when there is no windfall( i.e higher prices or unexpected income).

  3. Chamber of Mines is a lobby group for the mines, paid by subscription fees and contributions of mining companies, being a mining expert for a number of years now at senior lever, I don’t consider their proposal to be impartial or as something that government should rely upon to form Mining Tax policy. Let Zambian government do their own study and consultation, then set the mineral royalty. Copper prices are increasing and have been projected to have a steady increase for the next 6 to 8 years. The use of copper in the manufacture of Electric cars migration from petrol/Diesel gives copper a lot of demand and we should not be blinded that copper is not profitable, else we play in the hands of politicians to receive bribes and keep royalties low

  4. Nigeria negotiated that for every barrel of oil taken from their ground 50% is given to the government. Forget royalties and profits. Zambia should do the same to avoid corporate gymnastics that leave its coffers with nothing.

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