Economic and financial expert Andrew Chibuye has backed the revision of the Zambian mining tax regime by the New Dawn Government as pronounced in the 2022 National Budget that is currently in motion.
Finance Minister Situmbeko Musokotwane in his 2022 budget speech announced that mining royalties are being deductible from income taxes.
According to the Ministry of Finance, mineral royalty determination has been amended to reflect a measure of both incremental and aggregate norm values.
Featuring on ZNBC’s Sunday Interview, Mr. Chibuye said assertions that the Government has scrapped mineral royalty tax were not correct.
Mr. Chibuye, the PricewaterhouseCoopers’ Zambia office Senior Country Partner, said people should know that mineral royalty is now tax deductible in the country.
“When you are sitting as an investor looking for a location where to take your mining investment. What would make you choose a certain jurisdiction? One of key considerations for example is how competitive the tax regime is? Forget about it being stable so our tax regime so our tax regime was then viewed uncompetitive because there is no tax relief on the expense that is actually incurred and that is where the real issue is. And you have to remember mineral royalty is taxed whether the mine is profit making or loss making as long as they are selling copper they pay 10%. Depending on the price but above $9000 it starts from below $4500 you pay 5.5%, above $9000 you pay 10%. So mineral royalty has not been abolished, it is the tax treatment of mineral royalty that has changed,” he explained.
Mr. Chibuye said the new tax regime is in line with global trends in mining countries.
“And what has happened is that this tax treatment is now consistent with what you see in other major mining jurisdictions in the world. It is also worth mentioning the 10% that we are seeing as mineral royalty tax for when copper prices are at the levels that they are is generally among the highest in the world. So all that is happening here is to bring back a bit more competitive investment to the sector and also at least in my personal view to make it fairer because in every jurisdiction the costs that you have incurred for your business should be deductible for tax purposes. It is a straightforward issue,” he said.
Mr. Chibuye admitted that mining companies will pay less tax after the revision of the mine taxation system.
“So what do we expect as benefits? What is going to happen? So mineral royalty is now tax deductible that means they (mines) pay less tax that goes without saying but justifying so at least in my view intended to attract investment. The law came into effect last week so we will now be able to hear what sort of announcements will be able to come out from the sector in terms of projects that are coming online,” he said.
Mr. Chibuye added:”It will take a bit of time but I think hopefully during the course of the year we should start to see some activities. The Zambian economy hinges on the mining sector; there is the Government and what it does and the rest of manufacturing, agriculture as well. What we then hope to see is for example exploration should start to ramp up then impact the whole value chain around that as projects start to get commissioned for those that can be commissioned in the short to medium term.”
Meanwhile, Mr. Chibuye is a fellow of the Zambia Institute of Chartered Accountants (ZICA) and an Associate of the Association of Chartered Accountants (ACCA).
The firm he works for, PricewaterhouseCoopers, is one of the world’s most prestigious Professional Services firms.