Columnists Features

Amendment of mineral royalty tax to save mines

AFTER an outcry from the Chamber of Mines, President Lungu directed the ministers of Finance and Mines to amend the 2015 mineral royalty tax system and make fresh recommendations on the policy to Cabinet by April 8, this year.
Mr Lungu said, after receiving submissions from individual mining companies and the Chamber of Mines, it was clear the new mining tax regime posed a challenge to some mining operations following the decline in copper prices on the international market.
This is how come this week, Cabinet approved the Income Tax (Amendment) Bill of 2015, which seeks to implement proposed changes to the mining tax regime and increase corporate income tax for mining operations from zero percent to 30 percent.
I am sure the announcement by acting chief Government spokesperson Ngosa Simbyakula that a Cabinet meeting approved the Bill that also seeks to introduce a variable profit tax of up to 15 percent for mining operations will represent a win-win situation for both the government and the mining sector.
Corporate income tax is levied on the profits of a firm, with different rates used for different levels of profits.
Variable profit-based taxes are taxes whose rate varies according to some measure of profitability or return on investment.
The Bill will also seek to increase corporate income tax rate for mineral processing from 30 percent to 35 percent and further limit the deduction of losses for mining operations to 50 percent of taxable profit charge.
So far, mineral royalty tax, which the mines cried foul about, has been set at nine percent for open-cast mining operations and six percent for underground mining operations.
The other aspect to this law is that Cabinet has approved the Gold Trade (Repeal) Bill, which seeks to repeal the Gold Trade Act in order to avoid duplicity as dealing in gold will be provided for in the revised Mines and Minerals Development Act.
So far, the Chamber of Mines has not complained about changes to the mines taxes and one hopes that these mines are not opposed to the changes Government wants to bring in.
There were so many threats of stopping some investments and even declaring some workers redundant. But one can only hope that this will be a thing of the past following consultations between the mining players and President Lungu and other senior government officials.
The Mineworkers Union of Zambia (MUZ) wants members of Parliament (MPs) to support the 2015 Mines and Minerals Development Bill since it also seeks to reduce mineral royalty for open cast and underground mining.
MUZ general secretary Joseph Chewe says that MPs should not consider the revised mining tax regime on partisan lines but they should consider supporting the bold decision to save the mining sector from collapse and avoid job losses.
There is no doubt the mining sector has undergone challenges after the decline in copper prices. The result has been lower output and loss of business by some contractors leading to job losses in some firms.
The mining sector is the mainstay of our economy, so supporting the revised mining tax regime is a matter of saving our economy.
These changes should certainly be mitigating factor to help the mining sector go through these turbulent times of low copper prices without having to suspend operations and laying off workers.
MUZ is happy with Government’s decision to respond to concerns of players in the mining sector by revising mining taxes.
The decision by government to respond to concerns of the mining sector must be welcome and not be judged harshly even without understanding the implication of the changes.
some of us look forward to informed dialogue on the issue so that at the end of the day, the mining sector can thrive and drive the economy while at the same time government gets its fair share of taxes to continue developing the country.
The author is editorials editor at Zambia Daily Mail

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