Friday, March 29, 2024

Progressive Mineral Taxation Regime Can help Limit the Fiscal Reformation

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By Webby Banda CTPD Senior Researcher (Extractives)

The Centre for Trade Policy and Development (CTPD) is calling for a progressive mining fiscal regime that captures a substantial amount of revenue in high mineral prices and provides fiscal space for mining companies in low mineral prices.

CTPD has observed that progressive fiscal regimes can help limit unilateral alteration of fiscal terms by the government.

The Centre notes that although the Zambian government has made an immense stride in making some fiscal instruments progressive such as the implementation of the sliding scale mineral royalty, it is important to be cognizant of the fact that this is not a single tax instrument that influences the progressivity of a taxation regime but the lump sum of all taxes. A mineral taxation regime can have a fiscal instrument that is progressive but still shows that it is regressive when taxes are analysed as a lump sum.

According to the Fraser Institute survey, Zambia has slipped into the world’s bottom 10 countries of attracting mining investment. This slip has been attributed to a negative policy perception by investors which has emanated mainly from frequent revisions in mining tax policy.

The frequent revisions in mining tax policy have reduced due to the fact that the country is not getting the maximum benefit from its resources in times of high mineral prices. This being so, there is a need to make the taxation regime more progressive. Doing so will help reduce the public’s perception of low gain from mining. This is because the progressive tax regime will capture a substantial amount of revenue in high mineral prices and provide fiscal relief to mining companies in low mineral prices.

Further, CTPD notes that in as much as the government should encourage progressivity in the mining fiscal regime it is important to provide the right balance with the administrative capacity of Zambia Revenue Authority.

Additionally, it is also important to note that profit-based tax instruments by their nature are known to induce progressivity. However, this is contradictory because profit-based tax instruments are difficult to administer than revenue-based tax instruments. Under profit based tax instruments both revenue and costs are manipulated by the investor to reduce the tax incidence.

CTPD wishes to note that the concept of progressivity in mining taxation should not be limited to copper. There is need to apply progressive tax instruments to other minerals such as cobalt, gold and nickel.

5 COMMENTS

  1. These are the issues Zambians need to be discussing more and more. Not until we gain full domination over our mines and are able to dictate the price of our resources on the international market can we rightfully say we are “proud and free” as we claim/sing in our national anthem.

    Progressive taxation is a good alternative but we must strive for the better way: management of mines, set up industries to develop finished products in order to stop the ongoing exploitation of exporting raw materials.

  2. Unfortunately the author ignores the other side of the coin, which is, govt’s spending plans. No amount of money will ever be enough in a situation where govt spends money worse than a drunken sailor. This needs stressing. Whn a sailor goes out on a long voyage, they remain at sea for long periods during which time their allowances pile up without a chance to walk into a shop where to spend it. Whn they finally dock, they really spend. But that’s eraned money and not borrowed money. Our govt on the other doesn’t hv that kind of money because they are borrowing. Hw hv they spent it?

  3. Most informed people no doubt hv noticed the creation of wht has been dubbed Public Investment Board by govt last week. It’s actually admission by govt that they hv been spending money worse than a drunken sailor in the past.

  4. I am not interested in all this stuff. I just want to know why Spax is being treated as though he has committed a civil case and yet he is alleged to have committed a criminal case. I also need to know the type of syringes that were found on the Gwembe team. I also need good report on the 48 houses. What is the government’s comment on the mukula logs which were impounded in Malaysia? Scandals after scandals! Where is leadership in this country?

  5. THIS ARTICLE IS SO CONVOLUTED. IT SEEMS TO BE ADVOCATING PROGRESSIVE TAXES AND AT THE SAME TIME TIES ITSELF IN TWISTED ARGUMENTS AGAINST IT.
    PLEASE BE LUCID AND TO THE POINT

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