Government has disclosed that extensive work has been done towards the development of an optimal fiscal and regulatory regime for the mining sector.
Finance Minster Ngandu Magande says only a few ‘final touches’ remained before the 15 member team concluded its work whose outcome would be announced in the 2008 national budget.
Mr. Magande said at a press briefing in Lusaka today that an optimal fiscal and regulatory regime once put in place would ensure that Zambians got a fair and equitable share of their resources..
He added that the regime would also enable the mining companies get an appropriate return on their investment.
The Minister stated that governments objective is to have a strong and robust mining sector with a fiscal and regulatory regime that is efficient and attractive to investors.
“With this kind of regime , I do not see any need for Development Agreements (DA) in the future because all the intents and purpose of which the investors want DA shall be provided in the framework,’; he stated.
Mr. Magande said the status of the negotiations on the mining agreements, the principal should be the case for all other sectors in the economy.
He said because of the concessions under the Development Agreements (DA) with the mining companies, contributions are not consistent with the revenues being made by the mining companies.
The Finance Minister said it is clear from their contributions that there is inequality in the sharing of revenues from the country’s major resources.
He stressed that the mining companies should contribute more to government in order to fulfil the stated purpose of the DA which are to secure the maximum benefit and adequately contribute to the advancement and social and economic welfare of the people of Zambia.
“This clearly demonstrates the lopsidedness of these agreements and under such circumstances, it is extremely difficult for the government to continue signing further Development Agreement on the same terms,” he said.
Mining companies are this year projected to earn about US$3.5 billion of which only 10 percent (US$198 million) will be paid to government in tax contributions.
Due to rising copper prices on the international market, mining companies in the last two years, earned US$1.6 billion and US$3.1 billion respectively while US$26 million and US$76 million was paid to government as taxes.
Government had appointed a team, comprising technocrats from government ministries and departments to renegotiate the Mining Development Agreements (DA) because of the stability clauses in the DA.
The teams mandate was however extended so that they could also come up with an optimal fiscal and regulatory regime for the sector for the future.
The team chaired by Secretary to the Treasury Evans Chibiliti has undertaken consultative visits which include major mining countries such as Chile.
The team had also engaged international consulting firms from Norway and the USA purely to assist them with an international perspective and best practices on the matter.
Findings by the team revealed that Zambia’s fiscal regime comparable to other mining countries has the lowest effective tax rate in the mining sector.
Zambia’s effective tax rate under the DA regime stands at 31.8 percent, while Zimbabwe was at 41.3 percent, South Africa at 43.4 percent and Angola at 53 percent.
At International level, Zambia still has the lowest effective rate followed by Peru with rate of 39.7 percent.