Green Party reaction No.5 To budget speech: Proposed change to the mineral royalty tax regime

Dear Editor, AS part of its direct taxes reforms for the 2022 budget, the UPND Government plans to “introduce the deduc[1]tability of mineral royalty for corporate income tax as[1]sessment purposes.” This measure is projected to trig[1]ger a revenue loss of K3.2 billion (equivalent to $190 million). Mineral Royalty payable or paid is a non-deductible levy for com[1]puting company income tax when arriving at the gains and profits of a person carrying on mining operations. Currently, mineral royalty rate regime payable is: (a) 5.5 percent of the norm value, when the norm price of copper is less than four thousand five hundred ($4, 500) United States dollars per tonne; (b) 6.5 percent of the norm value, when the norm price of copper is $4, 500 per tonne but less than $6,000. (c) 7.5 percent of the norm value, when the norm price of copper is $6,000 per tonne but less than $7, 500.00. (d) 8.5 percent of the norm value, when the norm price of copper is $7, 500 per tonne but less than $9, 000.00. (e) 10 percent of the norm value, when the norm price of copper is $9, 000 per tonne or greater. This regime was arrived at after extensive consultations, having lost out as a nation during the 2008-2011 copper super cycle. It will be unintelligent to change the mineral royalty tax regime as proposed in the UPND 2022 budget. Here is why: As you will note from the table here, even when copper is at its lowest, as was the case in 2016, Government revenue is largely de[1]pendent on mineral royalty tax. As you will note from the royalty tax sliding scale, when the price of copper is at its peak, the royalty revenue is super. If it becomes de[1]ductible for corporate tax assessment, that will be as good as scrap[1]ping off the corporate tax. Already, as you can see only First Quantum (including Kansanshi), and Chambishi Copper Smelter pay substantial corporate income tax. The rest play around with numbers and at the end of the day, pay nothing. As can be noted in 2016, the three paid US$105.54 million. All other mines put together paid a paltry US$7.24 million. In 2020, First Quantum paid US$209.50 million in mineral royalties and US$202.80 million in corporate tax. If mineral roy[1]alty tax was deductible on assessment of corporate income tax, First Quantum would have paid a paltry US$6.70 million. As the Green Party, we are very concerned with the ballooning external debt, which PF left at US$14.71 billion, and UPND has in[1]creased to US$17.30 billion in under two months in Government. We think that every cent generated from our natural resources should go towards dismantling the debt so that we don’t continue overburdening posterity with our debt liability. It is senselessness and carelessness to manage our natural endow[1]ment with such an over-generous attitude. PETER SINKAMBA