ACTIONAID Zambia says Zambia still offers generous incentives that mines can rely on to balance up their equations in terms of operation costs.
Making a submission to the parliamentary Budget Committee on Monday, ActionAid Zambia programme manager – governance Musonda Kabinga said there would be more additional revenues being generated under the mineral royalty taxes as well as the corporate income taxes.
He told the committee chaired by Kapiri Mposhi UPND member of parliament Stanley Kakubo that mineral royalty was not necessarily a tax.
“A royalty is a payment to the owner of an asset…. Mineral royalty is levied on revenue and not on profits. I should also mention that mineral royalty is charged under the mines and minerals development Act. If you look at the proposed changes, we understand that government has proposed to make changes at the rate of 1.5 per cent. Previously the lowest rate was four per cent but it will now be 5.5 per cent…” Kabinga said.
He also explained the reasoning or argument by mining firms that the proposed mineral royalty taxes were not conducive for investments.
“One of the reasons that have been advanced is that if you look at most mines… There were prospects for exploration and mines are of the view that the current mineral royalty taxes will hamper those prospects because perhaps more taxes will be paid. [But] from where we stand, we are of the view that, to some extent, it (response from mining firms) is grossly inaccurate for a number of reasons,” Kabinga highlighted.
“If you look at the cost of production for mining firms or you look at the mines’ operation costs, there is the issue of labour, electricity, fuel, explosives, maintenance of machinery and equipment, support services and transport costs. With regards, for instance, to the issue of labour, we know that there are expatriates who earn more money than Zambian employees. So, from where we stand that argument to say ‘it will hamper our operation and we might reduce on labour, job cuts,’ the main issue is to look at the wage bill between the expatriates and local Zambians.”
He stressed that: “If you look at all the stages of mining, we are still of the view that, to a larger extent, Zambia still offers generous incentives that mines can [rely on] to balance their equations in terms of operation costs.”
On Value Added Tax (VAT), Kabinga noted that the government had not disclosed the basis of shifting from that tax to sales tax.
“The basis has not been explained why we are migrating from VAT to sales tax. But we are aware that there are a lot of VAT refunds under the mining sector,” said Kabinga.
“So, from where we stand, we don’t know whether we are migrating to sales tax with an anticipation to raise more revenue or we are migrating to sales to try and ensure that going forward we reduce on the VAT refunds. Sales tax could have a higher chance of tax evasion as compared to VAT….”
The ActionAid Zambia delegation at Parliament buildings comprised Kabinga, communications and campaigns manager Joan Chirwa, and governance officer Geoffrey Sizala.