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IMF Welcomes Zambian Mining Tax Regime Review

by Lorys Charalambous,, Cyprus

03 April 2015

The leader of a recent International Monetary Fund (IMF) mission to Zambia has welcomed President Edgar Lungu's call for a review of the country's mining tax regime.

IMF mission leader Tsidi Tsikata said: "The mission welcomes the recent easing of documentation requirements for value-added tax (VAT) refund claims of exporters and urges the authorities to resolve the large stock of outstanding claims. The mission also welcomes President Lungu's directive calling for a review of the mining tax regime that came into effect at the beginning of this year, which has had a negative impact on the sector. "

"We hope resolution of the impasse will result in a transparent system applicable to all mines rather than mine-by-mine agreements that would likely entail the government foregoing substantial revenues to keep individual mines in operation."

"While pressures on the economy have grown, the challenges are not insurmountable. Resolute actions to contain the budget deficit, resolve the mining tax disputes, and foster policy coherence and stability would go a long way toward boosting investor confidence and unlocking the country's high growth potential."

Lungu had confirmed at his inauguration on January 25 that he would maintain the previous Government's sharp increase in mining royalties, which was introduced on January 1 this year. However, following warnings from within the industry that increased royalties would make some mines unprofitable and lead to closures, Lungu recently said the Government will consider either targeted tax breaks, handed out on a case-by-case basis, or a temporary return to the 2014 fiscal regime until a more amicable regime is negotiated.

Lungu has directed the Minister of Finance and the Minister of Mines, Energy, and Water Development to carry out the review and to present recommendations to the Government by April 8, 2015.

TAGS: Finance | Energy | tax | mining | royalties | International Monetary Fund (IMF) | Zambia | tax breaks | tax reform

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