Zambia’s Tax Paradox: Burdening Citizens While Paving the Way for Mining Giants?
The recent announcement by the Zambia Revenue Authority (ZRA) regarding the 2025 Supplementary Budget Tax Changes has sparked considerable debate. While the government asserts these measures are necessary for economic growth, a closer look at the changes, particularly in contrast to the treatment of multinational mining companies, raises questions about equity and national interest.
The increased Withholding Tax from 15% to 20% on interest earned from Treasury Bills and Government Bonds directly impacts both residents and non-residents. This move, while potentially boosting government revenue, could disincentivize local investment and savings, ultimately affecting the financial well-being of ordinary Zambians. Similarly, the introduction of a 10% Excise Duty on betting services, though aimed at a specific sector, adds to the overall tax burden on citizens’ discretionary spending.
Perhaps most concerning for many is the implementation of the Minimum Alternative Tax (MAT) for firms and partnerships. While the ZRA states this applies to those “not declaring losses or near zero profits,” the definition and application of “near zero profits” remain ambiguous. This could disproportionately affect small and medium-sized enterprises (SMEs) that are still recovering from economic headwinds and reinvesting their earnings. The provision for a tax credit against income tax, while seemingly beneficial, still necessitates an upfront payment, which can strain liquidity for businesses.
In stark contrast to these measures, the Zambian government has, in recent years, granted significant tax concessions to multinational mining companies. For example, the suspension of import duty on copper concentrates, while intended to stimulate local processing, effectively reduces the cost of operations for large-scale miners. Furthermore, the deductibility of mineral royalty for income tax purposes significantly lowers the effective tax rate for these entities. This often means that despite extracting vast mineral wealth, their net contribution to the national fiscus, when compared to their profits, is perceived by many as inadequate.
This differential treatment creates an uneven playing field. While Zambian citizens and local businesses are asked to bear an increased tax load, some of the most profitable entities operating within the country seem to enjoy a more lenient tax regime. This disparity fuels the narrative that the government prioritizes foreign investment over the economic empowerment of its own people.
To objectively address these concerns, there is a pressing need for greater transparency from the ZRA and the Ministry of Finance. Detailed reports outlining the actual revenue generated from these new tax measures on citizens and local businesses, alongside comprehensive data on the tax contributions (and concessions) of multinational mining companies, are crucial. Such data would allow for an informed public discourse and provide evidence to support or refute claims of inequitable taxation.
It is undeniable that Zambia requires revenue for its development agenda. However, the approach to taxation must be perceived as fair and equitable. While attracting foreign investment is vital, it should not come at the expense of burdening citizens and local enterprises. A balanced approach would involve:
Re-evaluating Mining Tax Regimes: A thorough review of existing tax concessions for mining companies, with an aim to ensure a fair return for the nation’s resources, is essential. This could involve exploring options such as higher royalty rates, windfall taxes during periods of high commodity prices, and stricter enforcement of transfer pricing rules.
Supporting Local Businesses: Instead of increasing their tax burden, policies that genuinely stimulate the growth of SMEs through targeted tax incentives, access to affordable credit, and simplified tax compliance procedures should be prioritized.
Public Consultation and Education: Before implementing significant tax changes, extensive public consultation and clear communication on the rationale and projected impact are vital to build trust and foster understanding.
Ultimately, the goal of tax reform should be to create a system that is not only revenue-generating but also just, promotes local economic growth, and instills confidence among all stakeholders. Without a careful recalibration, the current trajectory risks exacerbating inequalities and undermining the very economic progress it seeks to achieve.
The Struggle Continues
Sensio Banda
Former Member of Parliament
Kasenengwa Constituency
Eastern Province
It is simple to understand. To run Mine, one needs large moneys and tax incentives are given because of its complex nature of mining
Ba Collins, what complex nature? These tax incentives are used as loopholes to avoid tax. What happened to the much talked about Konkola Deep (KCM) and Synclinorium shaft (Mopani). These were supposed to be the silver bullet to solve ore production problems. You ask these entities how much ore is coming from the investments.
The mines are extremely wasteful but unfortunately no one in government seems to keep track of what value these so called investments add to our economy. Most of them end up as white elephants. Mopani invested in a new Cobalt Roaster, Oxygen plant, Acid plant, Hot Leach plant and new shafts in both Mufulira and Nkana. Just go and check to see how many of these projects are still operational. Yet Mopani will claim they have invested USD2billion ( which is true), but the fact is those investments are as good as dead.
We are being overtaxed. There is no way you can have a meaningful middle class with this kind of tax regime.
The big multinationals, especially the mining companies are getting away with too much. They need to contribute fairly to the national treasury. At this rate, it is very difficult for SMEs to mature into big companies. Too many parasites demanding their pound of flesh.
So whether you make a profit or not you will be required to pay this 1% of your turnover. Where will that money come from when because of a loss you haven’t even paid yourself, you haven’t paid salaries, you haven’t paid rentals, you haven’t paid for utilities, the council also wants for business permit, health permit, fire permit, you haven’t even paid for napsa yet nor for those countless other fees like zema, affiliation fees to various bodies etc etc. And all this on top of the production challenges you are facing due to loadshedding, lack of fuel etc.