Zambia to lose US$3 billion due to mine tax breaks, M’membe

Filed under: Business,Special Comments |

Socialist Party leader Fred M’membe, argues that tax breaks introduced by the government in the mines in 2022 will result into a loss of USD3 billion (K51 billion), writes Alex Nkosi.

He says one of the key measures put in place by the government in 2022 is to make mineral royalties tax deductible when calculating Company Income Tax, which leads to revenue loss.

According to Dr. M’membe, the current government has given tax breaks to the mines resulting in a revenue loss of USD3 billion. This implies that in the absence of these tax breaks in 2020 and 2021, our tax revenue from the mines should have been high.

Let us look at these figures with a focus on Company Income Tax and Mineral Royalty Tax. In 2020 budget government targeted to collect total tax revenue of K53.7 billion, out of which Company Income Tax was K7.9 billion and Mineral Royalty Tax was K4.8 billion.

In 2021 budget government targeted to collect a total tax revenue of K53.2 billion, out of which Company Income Tax was K9.1 billion and Mineral Royalty Tax was K5.7 billion. In 2022 budget government has targeted to collect total tax revenue of K77.9 billion, out of which Company Income Tax is K16.4 billion and Mineral Royalty Tax is K12.8 billion.

The average copper price for 2020 was USD 6174 per tonne, in 2021 it was USD 8313 and in 2022 it is projected to be between USD7500 and K9000. The anticipated global recession might push it down.

Copper production is not expected to change that much in 2022 compared to the past two years. Given this analysis one would expect that in the past two years before the tax breaks Dr. M’membe is referring to, tax revenue and specifically Company Income Tax and Mineral Royalty Tax should have been very high such that a reduction should have been seen in 2022 with the introduction of the said tax breaks.

Note that Company Income Tax includes mine and non-mine tax revenue components, so the actual mine tax component of the Company Income Tax is actually lower than the figures highlighted above.

According to Dr. M’membe, Zambia is losing K51 billion in tax breaks introduced in 2022 when total Company Income Tax and Mineral Royalty Tax for 2022 is K29.2 billion. To make matters worse, in 2021 when we didn’t have these tax breaks, total tax revenue from Company Income and Mineral Royalty Tax was K14.8 billion, shouldn’t it have been higher since we didn’t have tax breaks and there isn’t any significant difference in average copper prices between the two years going by anticipated drop in prices in the second half of 2022?

In conclusion, it would be good for Dr. M’membe to demonstrate how Zambia is losing USD3 billion (K51 billion) through tax breaks introduced in 2022. It would further be good for him to explain why revenue from the mines was so low in the previous years when we didn’t have those tax breaks depsite copper prices being high.

I also want us to maximise benefits from the mining sector, I want a clear roadmap on gold mining, Mopani, KCM and local participation. I also want government to clearly explain what we stand to benefit (quantitative targets in revenue, jobs and support business) from expansion in copper production. However, as we engage government it is good to work with correct figures, hence the reason I’m challenging Dr. M’membe to come out and explain.


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