Zambian copper project
Photo by: Bloomberg
JOHANNESBURG (miningweekly.com) – The Chamber of Mines of Zambia on Thursday appealed to the government to refund withheld value-added tax (VAT) so that the mining industry could continue to contribute optimally to the country’s economy.
“Our sincere appeal is that VAT’s rule 18 be looked at urgently and resolved,” said the chamber, which added that exporting mining companies had been meeting all the claim requirements, bar the stipulation of proof of arrival in receiving countries, for which it was impossible to obtain customs documentation, owing to the potential for commodities to change hands several times before reaching their final point of consumption.
The chamber emphasised that while mining had the potential to continue to be the engine of the Zambian economy for a long time to come, it needed to be nurtured to generate the revenues needed for the economic diversification of the Central African country, which, according to mining research consultancy Wood Mackenzie, already imposes a relatively high overall effective tax rate of 45% on mining companies.
The Extractive Industries Transparency Initiative reports that Zambia’s mining revenue nearly doubled to Kwacha 7.7-billion in 2011, a year in which the mining industry contributed 44% of the total tax take, up from only 5% from 1997 to 2006.
In a media statement released to Mining Weekly Online, the chamber appealed for an urgent resolution to rule 18 and outlined how failure to pay withheld VAT refunds would force the cash-constrained industry to cut back on capital projects, lower production, make suppliers wait longer for their money, interrupt certain corporate social investment projects and diminish the collection of revenue by the Zambia Revenue Authority.
Conversely, a refund would place Zambia’s mining industry in a position to return to its customary winning ways of increasing mining investment, boosting manufacturing production and sustaining and creating jobs.
When the Zambian mining industry was in private hands for more than 40 years from the late 1920s, consistent investment led to copper production reaching 750 000 t/y and 64 000 direct jobs were created, but when it was placed in State hands for 24 years from 1972, copper production fell to 250 000 t/y and employment came down to 22 000 jobs.
When privatized again from 1997 to 2000, investment rose to $10-billion and mining expanded beyond the traditional Copperbelt into the North Western province, which resulted in copper production rising beyond 760 000 t in 2013 and direct jobs increasing to 90 000 in the same year.