Maravi

(LUSAKATIMES) Taxation Regime for Mining Companies Revisited

Taxation Regime for Mining Companies Revisited
Friday, January 21, 2011, 17:00
By Henry Kyambalesa

I am impressed by the clarity of Dr. Emmanuel Ngulube’s article on the issue relating to the taxation of mining operations in Zambia entitled “The Rationale of the Current Mining Fiscal Regime in Zambia,” which was published recently in the January-March 2011 issue of the ZIPPA Journal. Among other things, Dr. Ngulube, who is currently Permanent Secretary (Budget and Economic Affairs) in the Ministry of Finance and National Planning, has provided the following information:

“The current mining tax regime [in Zambia] gives an effective tax rate of 47 percent and compares very well with other resource-endowed countries, such as Angola (52.7 percent), Mozambique (52.1 percent), Botswana (50.6 percent), Namibia (47.9 percent), Tanzania (45 percent), South Africa (42.9 percent), and Chile (42.6 percent).”

Currently, mining companies operating in Zambia are taxed as follows:

(a) 3% mineral royalty on income (that is, earnings) from copper sales;

(b) 30% corporate profit tax on profits declared after deducting costs and mineral royalties;

(c) 15% variable profit tax on all taxable income (that is, profits) earned that exceed 8% of copper sales;

(d) Deduction of 25% of expenditures on machinery and equipment from taxable income per year once a mining project starts operating;

(e) 15% income tax on foreign companies and expatriate consultants providing services to locally based mining companies; and

(f) Mining companies cannot deduct from taxable income on a profitable mining site its capital expenditure on another mining site.

The on-going contentious debate concerning the taxation regime for mining companies would have been concluded by now if the highlights provided in Dr. Ngulube’s article were widely disseminated through private and public media institutions for open public debate. In fact, the government should have gauged the views of the general public before committing the nation to the terms of the contract.

Anyway, what would one expect from government leaders who apparently believe that Zambians are incapable of comprehending such matters? Expecting the government to solicit for views from the general public is, therefore, an illusion in a country where government leaders’ preoccupation is being on the campaign trail demonizing and castigating their political opponents, preaching about the superiority of their political party, and seeking recognition for their “remarkable accomplishments.”

Meanwhile, Zambians have continued to be hopeful that their government will open up the Zambia Daily Mail, Times of Zambia, Zambia National Broadcasting Corporation (ZNBC), and the Zambia News and Information Services (ZANIS) in order to make it possible for all segments of Zambian society to articulate their needs, demands and expectations through them. Their desire in this regard is eloquently captured by the following excerpt from The Post Online of January 14, 2011 in an article entitled “Why ban phone-in programs on the Barotse Agreement?”:

“Citizens of a democracy live with the conviction that through the open exchange of ideas and opinions, truth will eventually win out over falsehood, the values of others will be better understood, areas of compromise more clearly defined, and the path of progress opened.”

Whither my beloved country?

Postscript:

Winning elections seems to be the ruling party’s primary objective, as evidenced by President Rupiah Banda’s commitment of the country to a US$53 million loan from EX-IM Bank of China to purchase mobile clinics, which have just started arriving in the country. It has now become clear that President Banda is not only stubborn and arrogant; he also lacks good judgment. For how can a leader who has good judgment completely ignore the voices of so many citizens who were against the purchase of the mobile hospitals?

Clearly, the mobile clinics or hospitals are likely to last only a few years, given the poor state of roads in rural areas. Also, there are a lot of rural communities today where there are no motorable roads. Moreover, it is hard to imagine how the mobile clinics will be used – would they be driven around in rural communities on a regular basis in the hope of finding a sick person? Besides, the recurrent costs of maintaining the mobile hospitals will be prohibitive after the expiration of the 2-year contract with the supplier, that is, China National Aero Technology Import and Export Corporation. And how will the government prevent pilferage, and the potential for cohabitation and/or marriage breakdowns among nurses and doctors who will be assigned to work away from their families for lengthy periods of time?

It would have been acceptable if the loan was intended to be used on the following: (a) provision of free healthcare for all Zambians; (b) construction of more permanent healthcare facilities nationwide and housing units for health personnel; (c) provision of adequate medicines, ambulatory services and medical equipment; (d) financing of research designed to find cures for HIV/AIDS, cancer, tuberculosis, and other deadly diseases; and (e) hiring, retention and training of health personnel.

Labels: TAXATION, WINDFALL TAX

posted by MrK @ 7:43 PM