By CHARITY MOONGA –
ZAMBIA has continued to face challenges with its current mining tax regime because it is terribly susceptible to all forms of tax planning and scheming, Finance Minister Alexander Chikwanda has said.
Mr Chikwanda told Parliament on Tuesday that the current mining tax regime was open to all forms of tax planning schemes such as transfer pricing, trading through shelf corporations and tax havens and the country’s revenue administration could not easily detect those mechanisms.
He was contributing to the motion on the mines and minerals amendment Bill which passed to Committee stage.
The Bill is seeking to restructure the tax regime for mining operations by replacing the current tax structure and increase mineral royalty tax from six percent to eight percent for underground mining operations.
The Bill is also seeking to increase mineral royalty tax from the current six per cent to 20 per cent for open cast mining operations.
Mr Chikwanda further said, provisions on capital allowances and carry forward of losses in the current tax regime eliminate potential taxable profits.
Additionally in the current tax structure, only two mining companies were currently paying company income tax as most of them were claiming that they were not in tax paying positions.
Government had to use other options that were available to ensure that the country returned a fair share from its non-replenishable mineral resource endowment.
The envisaged proposed changes would increase revenue collections from the mining sector to achieve a more equitable distribution of mineral wealth between the Government and mining companies.
The proposed tax regime was easy to administer by the revenue authority as it would focus on production levels and content of minerals instead of basing revenue collections from the sector on profits which had mostly not been recorded by mining companies.
Mr Chikwanda was confident that the Mining Value Chain project and the Zambia Revenue Authority and the modernisation of the department of mines currently underway would mitigate the challenge of ascertaining the values of the country’s minerals so that the country collects appropriate taxes.
Contributing to the same motion, Chairperson of the committee on estimates on the mines and minerals development Amendment Bill, Highvie Hamududu said the committee was of the view that Zambia had not realised adequate returns from the mining sector.
Mr Hamududu, who is also Bweengwa United Party for National Development (UPND) Member of Parliament said the committee appreciated the need to review the mining tax regime but said submissions by stakeholders to his committee should be taken into consideration.
Stakeholders submitted that the mineral royalty tax rate would be a challenge to them.