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Zambian Mining Tax Changes 'Strike The Right Balance'

by Lorys Charalambous, Tax-News.com, Cyprus

20 May 2016


Chamber of Mines President Nathan Chishimba has said that the changes to Zambia's mineral royalty regime, which recently received parliamentary approval, "will enhance the collection of mineral revenue by the Government rather than compromise it."

He was reacting to a media statement issued by a consortium of civil society organizations advising the Government not to implement the new proposed royalty regime on the grounds that it will "not maximize revenue in times of commodity price booms."

Chishimba praised the Government for introducing the new regime, noting that it recognized the need to balance increased tax revenue with continued employment and investment in new mining ventures. "One cannot separate mining tax revenue from mining investment, because it is the mining investment which ultimately produces the tax revenue," he added. "A good tax is one which balances these two competing objectives."

Regarding the organizations' view of the new regime, Chishimba reflected that a royalty is "a tax on production, not profit. It is pegged at a relatively low rate. Governments collect most of their revenue in times of commodity price booms from profit-based tax, which is much higher."

Under the new legislation, which is retroactive to April 1, 2016, there is a system of variable royalty rates for copper production. The rate is four percent when prevailing copper market prices are less than USD4,500 per metric ton, six percent when prices are USD6,000 per metric ton or greater, and five percent for all prices in between. A flat mineral royalty rate of five percent is set for other base metals and minerals, except for a rate of six percent for precious metals and gemstones.

With the new system, the Government aims to sustain Zambia's significant copper mining operations, and the jobs they provide, in the current period of low mineral prices. The Government has previously said that the change is "necessary to sustain continuous operation of existing mining companies, and avert the suspension of mining operations and job losses."

TAGS: tax | investment | business | mining | royalties | law | legislation | tax rates | Zambia

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