SOME mining companies will be forced to retrench workers while others may close if Government implements the new eight percent mineral royalty tax regime.
And the Zambia Chamber of Mines has also appealed to Government to urgently resolve the Value Added Tax (VAT) Rule 18 and ensure that the VAT refunds are made to all the exporters because failure to do so would lead to the suspension of capital projects.
Addressing the Parliamentary Committee on Estimates, Zambia Chamber of Mines president Jackson Sikamo described the new mining tax regime as unprogressive and has advised that Government to consider reversing it because it was not sustainable.
He said the new mining tax regime announced by Finance Minister Alexander Chikwanda in the 2015 national Budget had taken away the incentive of investing in the mining sector.
Mr Sikamo warned that Zambia risked creating high levels of unemployment should Government go ahead and implement the new tax regime.
And Kabwe Zinc Mine has with immediate effect laid off 170 employees out of which 158 were unionised while 12 were in management.
He said the mines were likely to suspend capital investment projects because of the new mining tax regime and that unless Government took a bold decision and reversed the law, the mining companies risked halting their operations.
Mr Sikamo said the new mining law would also erode investor confidence because the tax regime would create unfriendly environment for investment.
He said the Zambian mining sector was still young and needed to be protected because such harsh laws as the new mining tax regime would only make the sector less productive which would result in loss of employment.
Mr Sikamo said there was a potential risk that the new mining fiscal regime would be misunderstood and it was therefore important that dialogue between the mining companies and the Zambia Revenue Authority should be encouraged.
“We have looked at the new mining tax regime which has been adjusted to 8 percent from the current 6 percent. This tax is on gross revenue and is paid in cash. This means that the mines would have to be paying monthly. The new law has taken away incentives for investment and this would lead to loss of employment because capital projects would either be suspended or deferred or completely cancelled. This tax is not progressive and there is a possibility that the mining companies would be forced to close,” Mr Sikamo said.
And Mr Sikamo said VAT Rule 18 which requires that exporters obtain export documents for goods bearing certificate of shipment and tax invoices of the goods exported must urgently be resolved.
He said while it was the requirement that there must be proof of arrival of the exported commodities in the receiving country, the requirement was impractical.
Mr Sikamo said it was impossible for the exporters to track the products and obtain documentation from the receiving customs jurisdiction to confirm that the products had reached their destination.
“Our sincere appeal is that VAT Rule 18 be looked at urgently and resolved and that VAT refunds made to all exporters so that we can continue to progress on the path of increasing mining and manufacturing production to sustain and continue to create jobs.
‘‘Zambian mining industry will continue to be the engine of the Zambian economy for a long time to come. This industry needs to be nurtured so that we can continue to generate revenue required to diversify our economy,” Mr Sikamo said.
And chairman of the Parliamentary Committee on Estimates Highvie Hamududu said there was need for dialogue between Government and the mining sector.