DISCUSSING MINING TAX REVENUE WITH DR. FRED M’MEMBE

By Alexander Nkosi

Zambia was once the highest producer of copper in Africa. However, it has not only fallen behind the Democratic Republic of Congo in Africa but has also dropped to seventh in global ranking as of 2021. Recognising the need to increase copper production as prices are projected to remain high with the growth of the electric vehicle industry, the Zambian government has targeted to expand copper production from around 800,000 metric tonnes to 3 million metric tonnes in ten years. One of the key measures taken by government in 2022 is to make mineral royalties tax deductible when calculating Company Income Tax. This is expected to result in revenue loss of USD188 million (K3.2 billion)

One of the critics of changes made in the mining sector is Dr. Fred M’membe, who argues that tax breaks introduced in the mines in 2022 will result into a loss of USD3 billion (K51 billion). While every well meaning Zambian would love to see us get optimal benefits from the sector, it is also important for us to work with correct figures as we engage government. It would therefore be helpful if Dr. M’membe can demonstrate how he came up with the USD3 billion revenue loss.

According to Dr. M’membe, the current government has given tax breaks to the mines resulting in a revenue loss of USD3 billion. This implies that in the absence of these tax breaks in 2020 and 2021, our tax revenue from the mines should have been high. Let us look at these figures with a focus on Company Income Tax and Mineral Royalty Tax. In 2020 budget government targeted to collect total tax revenue of K53.7 billion, out of which Company Income Tax was K7.9 billion and Mineral Royalty Tax was K4.8 billion. In 2021 budget government targeted to collect a total tax revenue of K53.2 billion, out of which Company Income Tax was K9.1 billion and Mineral Royalty Tax was K5.7 billion. In 2022 budget government has targeted to collect total tax revenue of K77.9 billion, out of which Company Income Tax is K16.4 billion and Mineral Royalty Tax is K12.8 billion.

The average copper price for 2020 was USD 6174 per tonne, in 2021 it was USD 8313 and in 2022 it is projected to be between USD7500 and K9000. The anticipated global recession might push it down. Copper production is not expected to change that much in 2022 compared to the past two years. Given this analysis one would expect that in the past two years before the tax breaks Dr. M’membe is referring to, tax revenue and specifically Company Income Tax and Mineral Royalty Tax should have been very high such that a reduction should have been seen in 2022 with the introduction of the said tax breaks. Note that Company Income Tax includes mine and non-mine tax revenue components, so the actual mine tax component of the Company Income Tax is actually lower than the figures highlighted above.

According to Dr. M’membe, Zambia is losing K51 billion in tax breaks introduced in 2022 when total Company Income Tax and Mineral Royalty Tax for 2022 is K29.2 billion. To make matters worse, in 2021 when we didn’t have these tax breaks, total tax revenue from Company Income and Mineral Royalty Tax was K14.8 billion, shouldn’t it have been higher since we didn’t have tax breaks and there isn’t any significant difference in average copper prices between the two years going by anticipated drop in prices in the second half of 2022?

In conclusion, it would be good for Dr. M’membe to demonstrate how Zambia is losing USD3 billion (K51 billion) through tax breaks introduced in 2022. It would further be good for him to explain why revenue from the mines was so low in the previous years when we didn’t have those tax breaks depsite copper prices being high.

I also want us to maximise benefits from the mining sector, I want a clear roadmap on gold mining, Mopani, KCM and local participation. I also want government to clearly explain what we stand to benefit (quantitative targets in revenue, jobs and support business) from expansion in copper production. However, as we engage government it is good to work with correct figures, hence the reason I’m challenging Dr. M’membe to come out and explain.

6 COMMENTS

  1. Well articulated. Opposition leaders have all been singing the same tax break song. This is a challenge to all of them to challenge your arguments.

  2. This is a very good observation yoiung man. Simply put, Fred Mmembe is a crook, accomplished liar and untrustworthy. Anything he says about the current is exergerated, fake and untrue. I doubt it if he will respond at all because you have caught him cooking his own figures that he cannot explain.
    May be his “girlfriend,” the man with very big bums, Cosmas Musumali will respond. That ugly fool cant stand the humiliation of her boyfriend, Mmembe.

  3. Who else was not paying tax?

    He must be taken to account because tax evasion which he seems to understand is a crime everywhere

  4. I WAS ALSO WONDERING. THE MATHEMATICS WERE NOT ADDING. ZAMBIA´S MINERAL EXPORTS ARE ABOUT USD7BILLION. USD3BILLION FRED MEMBE IS SUGGESTING MEANS WE ARE TAXING MINES A CORPORATE TAX OF 42% ON SALES. ASSUMING MINES MAKE A PROFIT OF USD3BILLION. IT MEANS WE ARE TAXING ALL THE PROFITS.

    HOW DO THESE PEOPLE COME UP WITH WEIRD/STRANGE NUMBERS? THOUGHT PROCESS SEEMS TO BE FAULTY.

  5. Fake Socialists like Mumembe don’t understand these things … Kikikiki.
    Socialists don’t understand the difference between Cash flow and profit. They think all the money coming into the business is profit. And this is how Socialists kill private businesses because they take away even working capital through punitive tax regimes!
    This is the reason many principled people don’t do business with the Past Newspaper!
    Maybe the sales have gone low and to make up, someone wants to resort to discredited ideology that can help line his depleting pockets … Kikikiki

  6. Mumembe is a conman that’s why he failed to run the ka simple newspaper. Everyday coming up with stories cooked in his head. He cant outdo bally and situmbeko team these gentlemen are what zambia needs. Mumembe will run this country down given a chance to lead. These other opposition politicians are blank files all they know is to complain about unga and cooking oil, very basic. Others ati they haven’t built a toilet, in this time and age can you be talking about toilets? Non of them are fit to lead this great country. For now they are just noise makers. Bally knows what he is doing, ma blank file will complain to their grave and never achieve anything. Mumembe socialism is not wanted, stop cooking fake figures.

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