Zambian mining firms unable to explain impact of higher taxes

4 January 2019 (Last Updated January 4th, 2019 11:31)

Zambian permanent secretary for mines Paul Chanda has said that the company's mining firms have been unable to justify how higher taxation would undermine their profits, despite the industry's continued objections to the new tax framework.

Zambian mining firms unable to explain impact of higher taxes
Zambia is a leading producer of copper in Africa. Credit: Patrick Lauke

Zambian permanent secretary for mines Paul Chanda has said that the company’s mining firms have been unable to justify how higher taxation would undermine their profits, despite the industry’s continued objections to the new tax framework.

Citing Chanda’s comments, Reuters reported that the mining ministry had asked companies to indicate how the new taxes would impact their production and profitability by end of last week, but none had so far indicated any.

Chanda told the news agency: “Two mining companies have written to us asking us to give them more time but we haven’t heard anything from the others.”

In September, Africa’s leading copper producer, which is struggling with mounting debt, included in its annual budget a plan to increase mineral royalty rates by 1.5% from the beginning of 2019.

The budget also featured a fourth tier rate at 10% if the copper price touches more than $7,500 per tonne, and made minerals royalties non-deductible for tax purposes. It also plans to replace value-added tax with sales tax by April.

In December 2018, the Chamber of Mines stated that due to the new framework, over 58% of the copper producers in the country would run into losses at current prices, which would put 27,900 jobs at risk, but individual companies have failed to support this claim.

“Two mining companies have written to us asking us to give them more time but we haven’t heard anything from the others.”

Mining contributes to over 70% of the country’s foreign-exchange earnings.

Among the firms operating in the country include Glencore, Barrick Gold, Vedanta Resources and First Quantum.

In December 2018, Toronto-listed First Quantum stated that it would remove over 1,000 employees from its Kalumbila copper-nickel mine in the first quarter of this fiscal year due to higher taxes.