In July 2016, the government of Zambia announced a new Mineral Royalty Tax based on a
sliding scale that varies between 4% and 6%, depending on the copper price.
We in the industry warmly welcomed this development, which we believe marked a shift away
from the harmful mining tax policy proposals of recent years, towards a more pragmatic and
realistic tax policy that views the mining industry as partners in development.
Zambia’s new Finance Minister, Hon. Felix Mutati MP, in the budget address to Parliament on
11th November 2016, made clear that “we cannot spend what we do not have”; a reference
to the urgent need to deal with the country’s growing budget deficit, and government
indebtedness, caused by past expansionary spending.
Fiscal restraint is necessary, but it need not have an adverse effect on economic growth and
development, if the right climate can be created for increased levels of private investment into
Zambia. The ‘multiplier’ effect of investment is well documented, and recent research has
shown a historic correlation in Zambia between investment levels, mining output and GDP
growth, particularly in the decade following privatisation.
What is the right climate? Let us be clear, it does not mean ultra-low tax rates, and light
regulation. It means being internationally competitive, in every sense.
Whilst there have been significant improvements, Zambia remains an outlier. It still has one of
the highest effective tax rates compared to other copper producing countries, and a terrible
recent history of policy instability. This deters badly needed investment.
With the renewed spirit of dialogue and cooperation which now exists with government, we
believe that it is possible to devise a more competitive mining tax regime that could provide
the economic stimulus that will help to grow industry, the wider economy and employment,
and ultimately deliver more tax over the long run.
With this objective in mind, we are publishing this freely available booklet Taxation and mining
investment in Zambia. It explains, in layman’s terms, the challenges of designing a mining tax
regime that benefits both the mines which pay tax, and the governments which receive it.
President: Zambia Chamber of Mines