Zambia To Reduce Tax Burden On Copper Mining Companies

According to the Wall Street Journal, Zambian Minister of Finance Alexander Chikwanda declared on 26th August 2014 that the Government had decided to reduce the taxation of copper mining industries.

Furthermore the Government of Zambia would be willing to get rid of the controversial VAT General Administration Rule Number 18, under which the Zambia Revenue Authority (ZRA) has been withholding USD 600 million from various copper mining companies.

The Rule, which aims at improving transparency and fighting tax evasion, requires mining companies to present import certificates from destination countries.

However, certain companies couldn’t comply with the rule because of their use of middlemen to export copper to other countries in addition to the fact that it required documentation from importers outside the country’s jurisdiction.

Mr.Chikwanda has recently been at the front of the opposition to this rule, claiming not only that it had proven impractical, but also adding: ”The VAT Rule…has inadvertently undermined confidence in the economy, The Government has a duty to revisit practices which impinge negatively on the efficient functioning of the economy. The mining sector is critical to the economy.”

Several companies have been pressing the government over the refund of more than $600 million in accumulated value-added tax refunds for the past year, but the ZRA had earlier said it would pay the refunds only if the companies produced import certificates.

Minister Chikwanda had already voiced his support to the companies’ request in June and July 2014, proposing ways to refund the copper miners such as a staggered payment.

Zambia, one of Africa’s largest copper producers, remains largely dependant on its copper mining industry, which accounts for 65% of the country’s exports, according to the MIT’s Observatory of Economic Complexity.