By Henry Kyambalesa
I am impressed by the clarity of Dr. Emmanuel Ngulube’s article on the issue relating to the taxation of mining operations in Zambia entitled “The Rationale of the Current Mining Fiscal Regime in Zambia,” which was published recently in the January-March 2011 issue of the ZIPPA Journal. Among other things, Dr. Ngulube, who is currently Permanent Secretary (Budget and Economic Affairs) in the Ministry of Finance and National Planning, has provided the following information:
“The current mining tax regime [in Zambia] gives an effective tax rate of 47 percent and compares very well with other resource-endowed countries, such as Angola (52.7 percent), Mozambique (52.1 percent), Botswana (50.6 percent), Namibia (47.9 percent), Tanzania (45 percent), South Africa (42.9 percent), and Chile (42.6 percent).”
Currently, mining companies operating in Zambia are taxed as follows:
(a) 3% mineral royalty on income (that is, earnings) from copper sales;
(b) 30% corporate profit tax on profits declared after deducting costs and mineral royalties;
(c) 15% variable profit tax on all taxable income (that is, profits) earned that exceed 8% of copper sales;
(d) Deduction of 25% of expenditures on machinery and equipment from taxable income per year once a mining project starts operating;
(e) 15% income tax on foreign companies and expatriate consultants providing services to locally based mining companies; and
(f) Mining companies cannot deduct from taxable income on a profitable mining site its capital expenditure on another mining site.
The on-going contentious debate concerning the taxation regime for mining companies would have been concluded by now if the highlights provided in Dr. Ngulube’s article were widely disseminated through private and public media institutions for open public debate. In fact, the government should have gauged the views of the general public before committing the nation to the terms of the contract.
Anyway, what would one expect from government leaders who apparently believe that Zambians are incapable of comprehending such matters? Expecting the government to solicit for views from the general public is, therefore, an illusion in a country where government leaders’ preoccupation is being on the campaign trail demonizing and castigating their political opponents, preaching about the superiority of their political party, and seeking recognition for their “remarkable accomplishments.”
Meanwhile, Zambians have continued to be hopeful that their government will open up the Zambia Daily Mail, Times of Zambia, Zambia National Broadcasting Corporation (ZNBC), and the Zambia News and Information Services (ZANIS) in order to make it possible for all segments of Zambian society to articulate their needs, demands and expectations through them. Their desire in this regard is eloquently captured by the following excerpt from The Post Online of January 14, 2011 in an article entitled “Why ban phone-in programs on the Barotse Agreement?”:
“Citizens of a democracy live with the conviction that through the open exchange of ideas and opinions, truth will eventually win out over falsehood, the values of others will be better understood, areas of compromise more clearly defined, and the path of progress opened.”
Whither my beloved country?
Postscript:
Winning elections seems to be the ruling party’s primary objective, as evidenced by President Rupiah Banda’s commitment of the country to a US$53 million loan from EX-IM Bank of China to purchase mobile clinics, which have just started arriving in the country. It has now become clear that President Banda is not only stubborn and arrogant; he also lacks good judgment. For how can a leader who has good judgment completely ignore the voices of so many citizens who were against the purchase of the mobile hospitals?
Clearly, the mobile clinics or hospitals are likely to last only a few years, given the poor state of roads in rural areas. Also, there are a lot of rural communities today where there are no motorable roads. Moreover, it is hard to imagine how the mobile clinics will be used – would they be driven around in rural communities on a regular basis in the hope of finding a sick person? Besides, the recurrent costs of maintaining the mobile hospitals will be prohibitive after the expiration of the 2-year contract with the supplier, that is, China National Aero Technology Import and Export Corporation. And how will the government prevent pilferage, and the potential for cohabitation and/or marriage breakdowns among nurses and doctors who will be assigned to work away from their families for lengthy periods of time?
It would have been acceptable if the loan was intended to be used on the following: (a) provision of free healthcare for all Zambians; (b) construction of more permanent healthcare facilities nationwide and housing units for health personnel; (c) provision of adequate medicines, ambulatory services and medical equipment; (d) financing of research designed to find cures for HIV/AIDS, cancer, tuberculosis, and other deadly diseases; and (e) hiring, retention and training of health personnel.
Chi doc zo’ona mudala walasa.mobile clinics is wasteful expenditure en the presido must b cited for treason,4 committing the country t such a deal, al in the haste t get a cut 4 use ku ma campaign.
The article has two stories in it. The title is just for the initial part. Could you find time to split it please?
# 2, you are right. there are actually three articles in it and it would have being wise to split it. i agree with whats being put forward in the article. we zambians are to blame for choosing leaders that are old and bring nothing to national development. i guess the Govt let people stay in poverty for times like this,the election year were they give them food every 5yrs in exchange for a vote. Shame on the politicians and it hates me that un-eduacated people are leaving well than as eduacated ones
“For how can a leader who has good judgment completely ignore the voices of so many citizens who were against the purchase of the mobile hospitals?”
Mr Kayambalesa, those voices were yours, you loud mouthed good for nothing town dwellers. The intended beneficiaries are very happy indeed because they know that RB understands their needs better than you. When you speak do not think that you are in the majority just because you have the luxury of access to the internet and LT.
“The on-going contentious debate concerning the taxation regime for mining companies would have been concluded by now if the highlights provided in Dr. Ngulube’s article were widely disseminated through private and public media institutions for open public debate……….Anyway, what would one expect from government leaders who apparently believe that Zambians are incapable of comprehending such matters?”
Now that is Kyambalesa with tail between his legs. So who is Dr Ngulube if he is not government?
Learn to listen to and trust your government. Anyway it’s good that you have recovered half your senses, Kyambalesa, and explained things to your colleagues. I wonder what they will say now? Next headline will be “Kyambalesa resigns from Pact and joins the MMD”. Hahaha.
The mines should just be re-nationalised in order for Zambia to benefit from them OR re-introduce the “wind-fall tax”. The 3% mineral royalty is too low – it should be a minimum of 7%!
Surprisingly the PF kaponyas who were so vocal on the tax regime are dead quiet on this article by their own “economist”. Just wait, more is coming, we told you that you would disintegrate come 2011, because you were not build on strong foundation. As RB says correctly states on ZNBC adverts “the strength of any structure lies in its foundation”. Does your Sata know this?
” (b) 30% corporate profit tax on profits declared after deducting costs and mineral royalties; ”
The key words being PROFITS *DECLARED*. Obviously, they are not declaring all their profits, so they can avoid paying income tax or sharing dividends.
This is why there is a need for a Windfall Tax on turnover/revenues, which can be calculated from the number of tonnes shipped times the global market price. There is no disputing either of those numbers, unless they start hiding their exports.
And is isn’t even that they are going to pay more taxes than they are than they owe us today, it is that those taxes are going to be collected.
Article too long, send it Economist students to create illutions. We don’t have time to discuss with people who don’t understand economics.
What really pisses me off is that mmd caders here think that anyone who disagrees with or doesnt support their mediocrity,inept mindset or has a different view point from theirs then that qualifies him/her to be a PF/PACT supporter or a kaponya
And if you look at their arguments,nothing makes sense,they cant look at an article and debate the points raised,,,from nowhere Sata is brought in the picture,meanwhile its got nothing to do with the opposition
#10 Smoothcriminal – Everything here has everything to do with your Mr Sata. Your Mr Sata wants to be President of Zambia and he talks a lot without understanding much. Without any research he yaps about windfall tax – he has no idea about the whole tax regime as shown here by another loud-mouthed character. With regard to the Mobile Clinics – understand that they would reach more people in the short term than permanent structures. The issue is that we now have breathing space to plan and build permanent structures. The planning is perfect – worry about the execution. But to just open your mouth without using your head – NOOOOO! That is not presidential!!!
Pipo should be careful with politics,you distroy your analytical ability of your brain and in the end you just become a political puppet.In as much as politics are important,pipo should free their minds and think objectively.It is very sad that we ve young men and women who cant think properly,objective,with integrity.In short we are lacking pipo of higher calibre in our country.Coz its not true that always the party u support can be collect & others wrong.Until u find a balance in life u risk being useless in the real world but only valuable in ur own country with ur political party.The world is too big than politics and it calls 4 young men who can negotiate objectively 4 the county,men of integrity,higher calibre and global looking pipo.We can do better friends in this life.Thank you!
Can someone please help me understand where the 47% comes from. To me there is only 3% mineral royalties and 30% tax on profits here. Variable tax is almost non existant in my view. Very rarely will profits exceed 8% of copper sales so we can count that as an effective tax. So effectively there is 33% tax which is less than the 35% that other companies pay on their profits. Can the learned doctor explain the effective tax rate that is slumped on petroleum oils which are not even a resource that originates from Zambia. Like # 8 rightly put it there is so much messaging of the profit figure to reduce tax
How can telecoms companies pay more tax than the mines. We always ask for God to help us. He gives us alot of minerals yet we still wait for his help. They say God helps those who help themselves, well in Zambia we definately know how to NOT help ourselves. We are a very gullible and docile people. We should never forget that these minerals are a wasting resource. By the time they are finished we shall become more poorer. You can tell from the state of the copperbelt towns now that the mines are under private hands what the fate of the nation shall become without even the little tax we get from the mines right now.
No 6 Irish London your thinking is out dated.please rest it and lets move forward. No 8 MrK in business in all the countries that are progressive countries you have to declare profit and you show evidence for that profit and that is the profit which is taxed. this is not unique to zambia.
zambia its tax regimen is comparable to countries that are now experiencing growth and huge investments. This is a pro business tax regimen and this is what zambia needs. the only mistake the Gov have made is not publishing this information earlier enough.
as for the mobile clinics i have serious reservation and i disagree with the article that the chinese loan should have gone toward free health case for all. that is as bad as nationalision