Tax hike to hurt copper production:- BMI Research...
The 2019 budget presented on 28 September by the Zambian Ministry of Finance generated a wave of criticism among mining investors as the government looks to significantly expand and increase taxes on mining companies operating in the country. The austerity measures were mainly predicated on the government’s greater commitment to slow the accumulation of new debt in a bid to reassure investors after the kwacha depreciated by 23.8% in the month of September (see ‘Quick View: Kwacha Sell- Off Increases Risks for Zambia’s Macroeconomic Stability’, September 18). However, the decision is likely to bring about only temporary relief, as economic growth prospects are dampened in the longer term due to a slowdown in copper production.
The main reforms proposed are as follows: Increase in mineral royalty tax by 1.5% across the different price bands, mineral royalty tax non-deductible against corporate income tax, reintroduction of sales tax in lieu of value added tax, introduction of a 15.0% duty on manganese ores and concentrates exports, introduction of 15.0% duty on gold and precious stones exports, introduction of a 5.0% import duty on copper and cobalt concentrates, restriction of tax for interest at 30.0% of earnings before tax, interest and amortization (EBITDA).