Africa Economy: Experts support Zambia's plan to change mine tax regime

Experts on Wednesday backed plans by the Zambian government to change the mining tax regime next year.

The Zambian government is considering changing the mining tax regime next year by moving from the current fixed mineral royalty regime to a sliding one following a decline in copper prices.

The move is aimed at helping mining firms absorb any copper price depression as the taxes will be determined by the copper prices.

In October this year, mining companies had proposed that the government should introduce a sliding mineral tax system to help the mines cope with prevailing commodity pricing.

Dr Mathias Mphande, a mineral expert and lecturer in the School of Mines at the University of Zambia (UNZA), said the system is what he has been advocating for over the years, adding that it is the best way to tax the mines.

"This is what I proposed to late President Levy Mwanawasa and finance minister Ng'andu Magande in 2008. Basically this is a windfall tax which follows the movement of prices. This is how you tax mines when the owners are not in the country," he told Xinhua.

"I am happy that they are coming back to what I proposed after realizing that everything they have been trying has failed," he added.

The country, he said, will be able to make more money from its minerals by having a sliding taxing system based on the price of copper on the international market in times of prices going up.

Professor Oliver Saasa, one of the country's leading economists, said the move is good, especially for mining firms as they will be made to pay taxes based on the price of copper.

He told local media that payment of tax will not only be based on the tonnage of copper produced but on the prevailing prices on the international market.

But ActionAid Country Director Pamela Chisanga said the decision to change the mineral tax regime does not augur well for the country since copper is a wasting asset which requires a fixed taxation system instead of a sliding one.

"We really don't understand the rationale they are using to arrive at such a decision. Having a sliding tax regime is not justifiable," she said.

She said the move will result in the country reducing tax revenue from the mines, adding that mining is a wasting asset which the government needed to maximize getting revenue from, adding that with a sliding tax regime system, the government will not be able to get much from the sector in times of low copper prices.

Currently, mining firms in Zambia are charged through a fixed mineral royalty tax system of six percent for underground mines and nine percent for open pit mines. Endit