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Mine royalties hitting copper

Increased rates have hiked mineral duty

ZAMBIA may this year lose about US$140 million in revenue from the mining sector because of the new tax regime.
In this year’s national budget, Government increased mineral royalty rates by 1.5 percent at all levels and Government has also introduced import duty on copper and cobalt concentrates at the rate of five percent.
Government has also introduced a fourth tier rate at 10 percent on the sliding-scale mineral royalty regime.
The regime will apply when copper prices rise beyond US$7,500 per tonne, among other taxes implemented. However, the price of the red metal has this year been hovering at almost US$6,000 a tonne.
But Zambia Chamber of Mines President Goodwell Mateyo said the implementation of the tax regime will prevent government from collecting enough tax from the mining sector.
The mining companies will lose 100,000 tonnes of copper as a result of the new taxes.
“Copper production this year may drop lower than 750,000 tonnes due to the 2019 tax regime which has made the industry to face more challenges. In terms of revenue collection, Government will only be able to collect US$445 million from the mining sector this year, but had it continued with the 2018 tax regime, it would have collected US$585 million,” Mr Mateyo said at a media briefing yesterday.
He said the tax regime will result in a drop in Zambia’s ranking as one of the top 10 copper producers in the world.
Mr Mateyo also said government should not introduce sales tax, which is non-refundable, as it will have an effect on the local value chain. Sales tax is aimed at reducing leakages in revenue and is expected to replace Value Added Tax.
“Long supply chains will be particularly badly hit, and the perverse incentives created by the tax will disadvantage local businesses. Zambian businesses that use or distribute imported goods and incentivise direct importation wherever possible will be affected,” he said.
Mr Mateyo said the inevitable consequence of implementing sales tax will result in fewer business opportunities. It is also likely to lead to more business closures and job losses.
He said as prices increase across the board, the purchasing power of salaries will be reduced.
Mr Mateyo also called for the quick resolution of the impasse between government and Konkola Copper Mines as it is contributing to the expected drop in copper production. The stand-off could also erode investor confidence.

By Kalonde Nyati, Zambia Daily Mail.

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