ABOUT MINERAL ROYALTY TAX (MRT)
By Sean Tembo – PeP President
It is a basic principle of taxation that tax is an appropriation and therefore one tax expense cannot be deductible in the computation of another tax.
The only exception to the above rule is when a “tax” is used as a collection mechanism for another tax, and such a tax is referred to as a Withholding Tax (WHT).
Therefore, by making Mineral Royalty Tax (MRT) a deductible expense in the computation of Income Tax (ITX), MRT has ceased to be a tax and has been converted into a collection mechanism for ITX. MRT has been converted into a WHT.
The total effect of the above policy change is that when mines prepare their provisional ITX returns at the beginning of a charge year, and they are not in a tax payable position, they will not be charged “MRT” for the rest of the year. In other words, the charging of “MRT” will now depend on the mines being in an ITX payable position, and we are know that mines are experts at declaring losses.
The original principle behind MRT was that we are charging the mines for extracting our minerals, regardless of whether that extraction is done at a profit or loss. The mere fact that these mines are extracting our minerals means that they should pay us something. Also remember ladies and gentlemen that the making of a profit when you are mining, is dependent on a number of factors including the competence of the management team for the mine.
That is the reason why MRT was introduced so that the country can get some money for as long as a mine is extracting our minerals, regardless of whether they are making a profit or loss. But what the New Dawn administration has done is to change MRT from a tax, to a collection mechanism for income tax. And remember that income tax is only chargeable when a mine makes a profit. The loss of revenue arising from removal of MRT will be billions of dollars.
Eventually all our minerals will be depleted with nothing for us as a nation to show for it. Not a single patriotic Zambian can support such a policy. The New Dawn administration needs to reconsider this.
SET 06.11.2021
MBA, BAcc, FCCA, FZICA, FCPA