THE Zambia Chamber of Mines (ZCM) has published a layman’s guide to understanding mineral Royalty Tax (MRT) following an announcement by Government for the introduction of a sliding scale system for the determination of MRT rates.
ZCM communications manager Talent Ng’andwe said chamber president Nathan Chishimba strongly believed that the guide would provide a clear picture on mining taxation, and MRT in particular.
“We have recently commended Government for announcing the introduction of a sliding scale system for the determination of MRT rates, linked to the prevailing copper price.
“In order for the public to really appreciate the significance of this move, we believe the whole subject of mining taxation, and MRT in particular needs to be better explained,” Mr Chishimba said.
He said the publication of the report signalled a more proactive approach by the industry in educating the public about important strategic issues.
“It is a natural follow-up to the media conference we held in December last year to explain the current crisis facing the global copper-mining sector.
“In the weeks and months ahead, there will be more such initiatives as the industry continues to engage constructively with stakeholders and the broader public,” Mr Chishimba said.
Among the key learning points of the report is that mines can take several years to become profitable and pay profit-based tax, and MRT is an effective way for Governments to get upfront short-term tax revenue.
Mr Chishimba explained that unlike a profits-based tax, MRT was a cost to the business as a rate that was too high could easily stifle economic activity and employment apart from discouraging further investment, and thus diminish the long-term tax pipeline.
He said MRT was levied on revenues rather than profits and was therefore payable even when mines were marginal or at loss-making.
The report also considers Zambia’s approach to MRT in comparison with other mining jurisdictions.
MRT is used by many countries around the world, and always exists alongside a tax on profit and together, the two taxes assure a stable flow of tax revenue throughout the life cycle of a mine.