THE non-deductibility taxation of mineral royalty between Government and mining companies needs to be resolved in an effort to transform the mining industry.
This is an issue that had been going for quite some time with little progress in attaining consensus, Centre for Trade Policy and Development (CTPD) senior researcher-extractive Webby Banda said in a statement.
“As the country went to the polls yesterday, it is expected that the political party that forms Government will transform the mining sector into a tool of national development.
“CTPD wishes to note that this can only be attained if six critical issues facing the sector are resolved,” Mr Banda said.
He said CTPD had dispensed a solution that was likely to instigate a win-win situation between the Government and mining companies by proposing that 50 per cent of the mineral royalty payable should be allowed as deductible expense to compute corporate income tax.
Mr Banda said there was need to support the artisanal and small-scale mining sector through Government driven initiatives such as the creation of resolving funds, provision of mining equipment, skills training among others.
“This sector continues to be seen as a source of hope for the many Zambians that cannot get formal employment,” he said.
Mr Banda said CTPD strongly believed that artisanal and small scale mining when properly exploited could attain poverty reduction and narrow the inequality gap in mining host communities and the country as a whole.
He said it was important for Government to resolve its disputes with mining companies.
For instance, he said, the Konkola Copper Mine (KCM) saga position itself as a serious issue undermining Zambia as a favourable mining investment destination.
“We need to appreciate the fact that the relationship between Government and investors is one of the crucial factors that mining companies look at before they can commit huge capital in any jurisdiction.
“A signal of expropriation of mining assets without compensation can potentially induce mining companies to shy away from committing capital to explore and develop mineral reserves,” Mr Banda said.
He said it was critical to set up a state-based value addition strategy for Zambia.
Mr Banda indicates that the African Mining Vision (AMV) recognizes that mining is a key sector for a growing, diversified, competitive, and industry-based economy in Africa.
He said for Africa to harness these benefits, the enclave nature of mining would have to be extinguished.
“Achieving this goal means that mineral-rich countries like Zambia will need to go beyond optimizing revenues collected from the mining industry, but act strategically to increase the value of the resources extracted,” Mr Banda said.
This can best be achieved by creating and strengthening the linkages between the mining sector and the rest of the economy.
“CTPD wishes to urge whoever forms Government to design and implement policies that enhance mineral value addition strategies that can create linkages with other parts of the economy,” Mr Banda said.
