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Mining firms in Zambia dismiss Moody's assessment of tax changes

Xinhua, April 29, 2016 Adjust font size:

Mining firms in Zambia on Thursday dismissed an assessment by international rating agency, Moody's Investors Service, that proposed changes to mining tax regime at a time when the government's fiscal situation was under pressure will just worsen the situation.

Zuzana Brixiova, Moody's lead sovereign analyst for Zambia, told local media on Monday that the changes were occurring at a time when Zambia's fiscal situation was under extreme pressure and at time the government was already facing liquidity shortages.

He warned that this will result in reduction in revenues and make timely fiscal consolidation even less likely.

But the Zambia Chamber of Mines, an association of mining firms operating in Zambia, said the proposed changes to the mining royalty tax were not a risk to the country's sovereign sustainability.

"It must be noted that the disastrous consequences of the mineral royalty tax regime as it stood, would have resulted in virtual death of the mining sector, something which would certainly have not boded well with the country," the association said in a statement.

It added that in coming up with the new mineral royalty tax regime, the industry with the government was looking for a long-term solution that would take the industry through the next 20-30 years, adding that increased production was fundamental to increasing government revenue.

Changes to the Mineral Royalty in the Mines and Minerals Development Amendment Bill, was currently before parliament awaiting approval.

According to the statement, the broad aims of government minerals taxation policy must be to generate immediate and lasting revenue in a manner which has not adverse impact on the health of the industry.

On February 17, 2016, Zambia's cabinet approved a new royalty system that varies depending on the copper price as it sought to keep struggling mines open and limit job losses.

Some mining firms laid off hundreds of workers last year in the wake of declining copper prices on the international market and a crippling power deficit. Endit