Africa-Press – Zambia. In the last 25 years, out of the eight (major mining corporations that have operated in Zambia, only two companies have been paying Company Income Tax (CIT). Meaning the rest have been declaring losses as our tax authorities have no capacity to find loopholes in their tax declarations. Base erosion and profit shifting (BEPS) seems to be very easy for these corporations. To maximize value from this sector, the Zambia Revenue Authority proposed the introduction of Mineral Royalty Tax (MRT) to bring certain “loss-making” companies on the tax base.
Mineral Royalty Tax is not a fee, it’s a tax. Currently, it’s paid as final tax by both loss-making and profit declaring mining corporations as a final tax. So it is net tax income to the Zambian people.
Why do mining corporations love income tax? Simple transfer pricing and exaggeration of costs to declare lower taxable income. Why do they hate MRT? It’s based on extracted minerals and easy to administer by ZRA and difficult to cheat.
Remember this, countries with deductible MRT and lower taxes in this industry have higher stakes or even controlling shares in private mining corporations. So they collect lower taxes and get dividends. In Zambia, some mining companies are 100 percent privately owned. Why such concessions? If Parliament has any spine, this is the time to show it.
At a time when the copper prices are reasonably high, the UPND government has proposed in the 2022 Budget that MRT becomes a deductible tax. Meaning whatever losses they make off CIT can be netted off MRT. This may result in a significant resource mobilisation loss. In the end, the only benefits we may get from the mining sector are only business and job opportunities and PAYE. This is a clear demonstration of surrendering our sovereignty to the capital and not the people.
Zambia is known as the second-largest producer of copper in Africa. Yet this sector has only been contributing an average 13 percent to our GDP before Covid-19 hit and around 25 percent after the pandemic hit us due to disruptions in trade and the global supply chain.
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