According to Zambia’s chamber of mines the planned mining duties and replacement of Value Added Tax with sales tax could see investments into the sector reduced, leading loss of jobs. .
Responding to Reuters, chamber of mines spokesman Talent Ng’andwe said capital expenditure cutbacks are estimated at $500 million should the tax proposals take effect.
“Our members continue to review their operations and are having to consider scaling back substantially while reducing capital expenditure by over a half billion dollars over the next three years,” Ng’andwe told Reuters.
“Consequently, reductions of over seven thousand direct jobs and more than double this number of indirect jobs would result.”
Presidential spokesman Amos Chanda said the minister of finance had informed the presidency that she would proceed with the implementation of the new taxes in January.
“The minister has told us that mining companies are trying to employ arm-twisting tactics but no single sector is immune from our taxation system,” Chanda said.
“Mining companies have no right to impose their proposal on the government. As far as the minister of finance is concerned, this is a fair tax system,” he said.
In its 2019 budget, the government announced plans to increase the country’s sliding scale for royalties of 4 to 6 percent by 1.5 percentage points and introduce a new 10 percent tax when the price of copper exceeds $7,500 per ton.
The chamber proposed that the sliding scale royalty rate be increased by 0.5 percent and the royalty rate should be 7.5 percent when copper prices exceed $7,500 per ton, Ng’andwe said.
Mining accounts for more than 70 percent of Zambia’s foreign exchange earnings and companies operating in the southern African nation include First Quantum Minerals, Barrick Gold Corp, Glencore and Vedanta Resources.
Zambia has said it is committed to improving the transparency of its debt management and will ensure that debt levels remain sustainable.
The International Monetary Fund rejected Zambia’s borrowing plans earlier this year and said the country was at high risk of debt distress, unnerving investors holding Zambian debt.