Zambia to Raise Mine Royalty in 10th Tax Change in 16 Years
(Bloomberg) -- Zambia plans to increase mining royalties next year as Africa’s second-biggest copper producer seeks to reduce its budget deficit. It’s the 10th tax change miners have faced in the past 16 years.
The royalty rate will rise by 1.5 percentage points across the board, Finance Minister Margaret Mwanakatwe told lawmakers in the capital Lusaka in her maiden budget speech on Friday. The current tax rates range from 4 percent to 6 percent depending on the copper price. The government also introduced a 10 percent charge if the metal climbs above $7,500 a metric ton, she said.
Shares of First Quantum Minerals Ltd., the African nation’s largest copper producer, fell as much as 5.2 percent trading before pairing losses to 3.2 percent by 12:07 p.m in Toronto. Copper was trading at $6,241 a ton on the London Metal Exchange.
Facing large fiscal deficits and external borrowing that led the International Monetary Fund to warn that Zambia is at high risk of debt distress, the government is once again turning to copper producers including Glencore Plc and Barrick Gold Corp. to boost revenue.
“As mineral resources are a depleting resource, it is vital to structure an effective fiscal regime for the mining sector to ensure that Zambians benefit from the mineral wealth our country is blessed with,” Mwanakatwe said.
Cobalt royalties will increase to 8 percent from 5 percent currently, according to the Zambia Revenue Authority. In addition, Zambia will introduce an import duty of 5 percent on copper and cobalt concentrates, the semi-processed forms of the metals, which would mainly impact miners in the Democratic Republic of Congo. There will be a 15 percent export duty for precious metals and gemstones, Mwanakatwe said.
The government also plans to replace value added tax with a non-refundable sales tax, which will impact mining companies that are owed hundreds of millions of dollars in VAT refund arrears. Zambia will settle outstanding verified claims, the minister said. She didn’t detail what the new sales tax rate will be, or if it would remain at the current 16 percent VAT rate.
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