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THE 10 percent import duty on capital equipment should be revisited because it is negatively affecting the mining industry, says Michael Phiri, tax partner at KPMG Zambia.

Mr Phiri said the major items of equipment used for sinking shafts and building plants were not manufactured locally, but were essential to developing mining projects.
He told the Mining for Zambia Magazine that a good Customs Duty regime operated on the basis that the capital goods and equipment had a low import duty, or ideally, were duty-free.
Mr Phiri stressed that semi-processed goods should attract a higher duty than capital equipment, while finished goods should attract the highest duties because neither of these categories supported local production.
“The 10 percent import duty on capital equipment is another negative measure that really has to be revisited.
“At the moment, the current duty regime is simply making it harder to develop projects that would stimulate production and economic activity which, again, is like shooting ourselves in the foot,” he said.
He further said: “we understand the frustration from the Government, from the perspective that some mines have been posting losses for as long as they’ve been in existence, but that doesn’t justify punishing the whole industry by taxing them twice over.”
Economist, Noel Nkoma, said an unjust and inequitable tax regime basically rewarded wrongdoing, and punished those who would like to be compliant and transparent.
Mr Nkoma stressed the need to understand whether Zambia was losing a substantial amount of money through tax avoidance and to find an amicable solution if it was true.
This, he explained, required improved governance and regulatory capacity for full public transparency over mining revenues.
He said hardening mining policy and increasing the tax burden is not the solution to this perceived problem.
“[We need to have] an equitable, just, and fair fiscal and tax regime which is able to unlock that future pipeline to create more jobs for our people, get more taxes into the treasury, and once again get the mining sector to thrive,” Mr Nkoma said.

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