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Government has highlighted various challenges it was facing with mining taxation such as tax base erosion and profit shifting, complex fiscal regimes and lack of transparency, among others.
Finance and National Planning Minister, Situmbeko Musokotwane, said due to the nature of the mining industry and unique characteristics of its operations, mining taxation could present various challenges.
Musokotwane said this at the official opening of the global conference on the future of resource taxation in Lusaka on Monday, noting that some of the challenges included tax base erosion and profit shifting.
He explained that mining companies may have to engage in aggressive tax planning strategies to minimise their tax liabilities.
“This could shifting profits to low tax jurisdictions, transfer pricing imbalances, or utilising tax incentives and loopholes. These practices can erode the tax base and reduce the revenue generated from mining operations,” he said.
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Musokotwane also cited complex fiscal regimes as another challenge faced in mining taxation.
He said the design and administration of mining taxation systems could be complex, particularly in countries with a large number of mining operations or multiple minerals being extracted.
“Balancing the need for attracting investment while ensuring a fair share of benefits for the country can be challenging, leading to intricate tax frameworks,” he said.
He further pointed out that transparency in the mining sector was crucial for ensuring that tax payments were fair and that revenues were effectively managed and utilised for benefits of the country.
However, he said, limited transparency in financial reporting and contracts could hinder effective monitoring and oversight of mining taxation.
“Addressing these challenges requires a comprehensive approach that involves robust tax legislation, effective enforcement and monitoring mechanisms, capacity building international cooperation to combat tax avoidance and profit shifting.
“It is important for governments to strike a balance between attracting investment in the mining sector and ensuring that mining companies pay their fair share of the taxes contributing to the social-economic development of the country and the well-being of citizens,” Musokotwane said.
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