By Fred M’membe
In the last 25 years, out of the eight (major mining corporations that have operated in Zambia, only two companies have been paying Company Income Tax (CIT). Meaning the rest have been declaring losses as our tax authorities have no capacity to find loopholes in their tax declarations. Base erosion and profit shifting (BEPS) seems to be very easy for these corporations. To maximize value from this sector, the Zambia Revenue Authority proposed the introduction of Mineral Royalty Tax (MRT) to bring certain “loss-making” companies on the tax base.
Mineral Royalty Tax is not a fee, it’s a tax. Currently, it’s paid as final tax by both loss-making and profit declaring mining corporations as a final tax. So it is net tax income to the Zambian people.
Why do mining corporations love income tax? Simple transfer pricing and exaggeration of costs to declare lower taxable income. Why do they hate MRT? It’s based on extracted minerals and easy to administer by ZRA and difficult to cheat.
Remember this, countries with deductible MRT and lower taxes in this industry have higher stakes or even controlling shares in private mining corporations. So they collect lower taxes and get dividends. In Zambia, some mining companies are 100 percent privately owned. Why such concessions? If Parliament has any spine, this is the time to show it.
At a time when the copper prices are reasonably high, the UPND government has proposed in the 2022 Budget that MRT becomes a deductible tax. Meaning whatever losses they make off CIT can be netted off MRT. This may result in a significant resource mobilisation loss. In the end, the only benefits we may get from the mining sector are only business and job opportunities and PAYE. This is a clear demonstration of surrendering our sovereignty to the capital and not the people.
Zambia is known as the second-largest producer of copper in Africa. Yet this sector has only been contributing an average 13 percent to our GDP before Covid-19 hit and around 25 percent after the pandemic hit us due to disruptions in trade and the global supply chain.
Is Mmembe being sarcastic, is he referring to Political parties? That only 2 parties are contributing MPs to parliament and most parties are 100% 1 person private owned?
With Lungu out, Fred Mmembe has an opportunity to revamp his Post newspaper and write such stuff on daily basis. His Socialist Party has served him well. It has kept him away from prison for tax evasion and unscrupulous amass of wealth. As evil as it was, it was a stratagem well executed–a life saver only thugs like him can use with success. He knew his party was going nowhere. Socialism is dead. Cuba is worse than Zambia. It is the worst Caribbean country after Haiti. Fred Mmembe is as ruthless as they come. Bean-brained and dangerous.
The best example I can give about mineral royalty tax is like you rent out your property, do you take into account whether your tenant earns a salary or not? NO! If the tenant has no income to meet the rent then he shouldn’t rent your property. What Bally & Situmbeko have done is like you telling your tenant that your rent must be deducted from the salary such that if his net pay is zero then rent shouldn’t be paid. What’s the benefit for using your property? The point is mining companies exploit out resource so MRT compensates for that. It doesn’t make sense that an educated youngman like Felix Nkulukusa can defend such a senseless decision. So Fred Mmembe is right. Unfortunately our Parliament is full of brainless chaps
Instead of countering the points president Mmembe has put forward someone here is attacking the person on frivolous things. President Mmembe has explained the disadvantages of the proposed tax form by those in government so our duty here is to argue either for or against not on how many girlfriends Mmembe has. Have people run out of ideas so soon?
The question is what are the other Copper mining countries doing to get maximum benefits from their resources.? Problem we have in Zambia is that we keep on changing tax regimes and rates, in the process we even confuse ourselves.
Hon Kang’ombe brought this matter up in Parliament yesterday and Bo Situmbeko defended it senselessly. Fred is spot on here, these foreign owned miners cannot be trusted. With the current price of copper, MRT should’ve been increased. That’s why the PF GRZ was right in taking over KCM and Mopani, then creating Zambia Gold Company and Kabundi Resources. Now upnd want to justify the giving away of our sovereignty??
Zambians can be very dull, look at the contributions by No 1 & No 2 to this very important matter, Africa Why?
We’ve been here before, interesting how we Zambians think that when a different person says the same thing then it has a different meaning. Our Zambia is in the hands of greedy thieves controlling our mines. Anyone who tries to correct this either dies mysteriously or loose office on the pretence of economic mismanagement. This is where Zambia’s real corruption is taking place not those trivial cases you spend years investigating and ending up with northing. We will never resolve our issues with the mines until we all gang up as a nation and expose these multinational thieves disguised as investors when really all they are doing is harvesting and leaving us with huge holes in the ground.
He said , Currently, MRT is paid as final tax by both loss-making and profit declaring mining corporations as a final tax.
But in the Proposal in the 2022 Budget that MRT becomes a deductible tax means that government would receive MRT and a reduced CIT when the mines make a profit and when they make a loss it is guaranteed to receive the MRT.
This is a confused presentation because the government proposal would bring in more taxes than what is happening now. Why did he not ask the minister of finance before expressing his luck of understanding of taxation issues.
The the other issue is the difference between Mineral Royalty Tax and a fee. He said MRT is not a fee, it’s a tax. This is the same thing because the impact of a fee and a tax is to reduce the amount…
received or receivable.
He says, Currently MRT , is paid as final tax by both loss-making and profit declaring mining corporations as a final tax. However, the proposal in the 2022 Budget that MRT becomes a deductible tax against profits means that government will receive MRT and a reduced CIT when there is a profit also when there is a loss it will receive a guaranteed MRT. Therefore, the budget proposal is better than the current situation. So what is the point? This is clearly a misunderstanding or just not knowing how tax works in practice. Also, he says Mineral Royalty Tax is not a fee, it’s a tax. This is one and the same. Tax, fee, levy etc all have the same impact of reducing an amount received or receivable.