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Saturday, August 6, 2022

Assertions that Zambia has scrapped mineral royalty tax were not correct-Andrew Chibuye

Economy Assertions that Zambia has scrapped mineral royalty tax were not correct-Andrew Chibuye

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.

22 COMMENTS

  1. The goodness about ZAMBIA is that even those working at bus stations can read and understand. Andrew Chibuye is only explaining how he has understood the budget document.

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  2. The question that needs asking is; what is a royalty? Once we’re clear about that this debate should end. Many businesses in Zambia are franchises including Andrew Chibuye’s PwC ( PricewaterhouseCoopers). These franchises pay royalties for using trade names of other businesses. These royalties are tax-deductible in Zambia. So why not mining royalties? That’s wht it boils down to; equity in the treatment of taxpayers.

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  3. Our colonial masters never left africa.

    Our natural resources are raw materials for their development, this is what they mean by countries of interest.

    These white people simply created Banks and Companies that we refer to as investers to indirectly continue stealing our natural resources.

    How can a mine not making profits survive for 20 years?

    Why do their CEO’s get as much money as they do?

    Subsidiaries mines post losses and yet investors keep on pumping money into their parent companies.

    These financial mercenaries need Organisations like IMF and people like HH to implement their plans.

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  4. Citizen, that’s a fair comment. In Zambia the Norwegian government has done its damnest to help us to develop capacity to tax mining operations fairly. They once sponsored a special audit which revealed a lot of dishonest conduct. What did the man u supported Rupiah Banda do? Everyone should know but the same RB wants his entitlement from the state for having been president of the Republic of Zambia.

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  5. These Price Water etc sort of companies make a bulk of their money by advising big multinational companies like mines on how to take advantage of tax loop holes.
    Evading paying tax is their bread and butter..
    Their second job is to lobby govt to implement such tax regimes.
    In Zambia we don’t need more investors in the morning sector what we need is financial intelligence to prove that these mine investors are thieves and secondly a govt which is not compromised to enforce measures to collect more tax from these mines.

  6. In Africa the opposition must be well funded to dislodge a ruling party because of dirty tricks/rigging.

    The question is how on earth did UPND manage to sponsor their existence in opposition for over 10 years.

    The simple answer is UPND had backers both local and international.

    How does UPND pay back. Of course your guess is as good as mine through business with govt (tenders) and such tax gifts as the one introduced by musokotwane and HH.

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  7. Ask yourself, Citizen, and then answer wht sort of agreement your PF government bound Zambia to with Glencore the former operators of Mopani Copper Mines. If not, put up or shut up.

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  8. ONE OF THE FIRST THINGS VEDANTA, WHO OWNED KCM, DID WAS TO REMOVE ZAMBIANS FROM THE COMMERCIAL DEPARTMENT OF KCM WHICH DEALT WITH COPPER SALES AND PURCHASES. ONE OF THE REASONS FOR THIS WAS TO ENGAGE IN TRANSFER PRICING PARTICULARLY OF VERY VERY COSTLY PROJECTS.
    ALL THE YEARS KCM UNDER VEDANTA WAS MAKING LOSSES WHILE MINES UNDER FIRST QUANTUM WERE PROFITABLE AND PAYING TAXES AND DIVIDENDS.
    LESSON LEARNED: VEDANTA SHOULD NOT BE ALLOWED BACK AT KCM.

  9. I have an interaction with PriceWaterHouse before it teamed with Coopers & Lybrand and I can’t say they were among the best. Chibuye’s argument is shallow and simplistic. If you want to understand why the Zambian mining tax regime has been changed several times you need to study the trends in the mining sector since 1993. And when he refers to world trends, he should at least mention one country so that we scrutinize its shareholding structure to understand its situation. ZCCM-IH has held an average 15% stake in these mining companies but these shares haven’t earned any dividend for entire duration they’ve been held. Mining companies like Mopani & Vedanta have never declared earn profits since they’ve been in Zambia. As an expert Chibuye must advise how GRZ can get around this…

  10. Don’t trust accounts. They are accomplices in many corrupt deals. Read about KPMG and their involvement in state capture in SA and you will understand my sentiments. Zambians, watch this PwC closely. Coopers was involved in our privatization of the mines in the early 1990s. Won’t go in detail but most of us know who was consultant at the time and the results. Ask yourselves, which investor will come now that didn’t come in the 90s when conditions were condussive? If they came, did they stay and made a difference in our livelihood? Rather keep your eyes open than listen to this waffling. And please don’t insult Zambians again. We thought the man at the top learnt a lesson about the last privatization but alas not. Rather keep the copper in the ground for the future generation and find…

  11. In the meantime ZRA has a burden of VAT refunds in billions of Kwacha. How do we compensate for the environment degradation and of course exploitation of our God given resource? Aren’t these the chaps who audited Agriflora and declared it very viable and just a few days later it was declared insolvent and liquidated?

  12. Ayatollah, it’s about enforcement of the law as it is now and not as u wished it was. Where else in the world is mining royalty not tax-deductible? U probably drink Cocacola but it’s not produced in Zambia by Cocacola Inc of the USA but by a franchise. The Zambian franchise pays royalties to Cocacola of the USA and it’s tax-deductible.

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  13. Chibuye stated the following: “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 issue is that Zambia is not the only country involved in mining. Secondly, what if the expected new investors do not actually come? How then will the tax money given away be recouped?

  14. Ayatollah, u’re a football fan and therefore ought to know that football players hv been known to collapse and die on the field of play after being certified fit by doctors. All professions hv limitations. They’re unable to tell us everything we need to know.

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  15. What’s the point of foreign investment if zambians don’t benefit from it?
    Company tax can only be paid if a company declares a profit. But this same man and his Pwc are the tax consultants to these foreigners and they will manipulate figures to ensure that as little tax as possible or no tax at all is paid.
    So making mineral royalty tax deductible for tax purposes doesn’t help Zambia at all. It just facilitates foreigners to take out our copper free of charge.

  16. What this guy is saying unlike the assertions made by Membe on this issue, is that MRT is a reductions against the mines profits and therefore reduces the amount subject to corporation tax . The mines would pay MRT whether it makes a profit or loss. If they make a profit the government receives the corporation Tax and the mineral royalty Tax.

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  17. The current narrative by many is increased participation in the mining sector by Zambians. But Chibuye is talking about policies to attract foreign investment! Zambia doesn’t need this kind of expertise. He’s just another hired gun

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  18. Why do u keep blocking my comments? You have been doing this but Lungu still lost. Can you stop this once and for all. Am I the biggest threat on this platform?

  19. What’s stopping Zambians participating in mining in their own country even whn they hv mining expertise to burn? Is it the government or bad old Zambian inability to come together and explore ways of executing investment projects?

  20. We watched the ZNBC interview and questions that were raised intelligenly but I think there an opportunity to see the weakness in this tax treatment revenues measure that has seen potentially a lost opportunity to share in minning revenues He could also atleast have provided an illustrative Financial statement on the various similar treatment including the proposed treatments in IAS 12 and 37 We can do better and achieve much to accrue sufficient revenues to fund Government Operations and other social services in minning townships

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