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The proposed new mineral royalty regime will reduce the industry’s tax burden which should ultimately lead to higher investments in explorations.
This is according to Zambia Institution of Policy Analysis (ZIPAR) Executive Director, Herrick Mpuku in Lusaka on Monday, December 5, 2022.
Mpuku said when he appeared before the Parliamentary Committee on National Economy, Trade and Labour Matters to discuss the Mines and Minerals Development (Amendment) Bill, 2022 that the proposal would also help to reduce the effective mineral royalty obligation faced by the mining companies.
ZIPAR, therefore, applauded Government for proposing a new mineral royalty regime that was migrating from the aggregate to an incremental basis for the calculation of royalties.
The proposed mineral royalty regime was based on the incremental value and helps to minimise distortions as earlier alluded.
For example, if the price of copper is at US$4,000 then the mineral royalty to be paid will be US$160.
And if the price rises to US$5, 000, only the US$1,000 which falls in the next will be assessed at 6.5 percent, which will be US$65.
Therefore, the mining firm would only pay mineral royalty totaling US$165, providing cost respite, as opposed to the US$325 that had to be paid under the current regime.
“This will reduce the mines’ tax burden which should ultimately lead to higher investments in explorations and mining and mineral value addition as the country positions itself for a copper boom due to the global drive to a green economy, including eliminating fossil fuel use in preference for renewable energies,” Mpuku said.
He observes that various stakeholders in the mining policy space have raised concerns over the current mineral royalty regime, more specifically the sliding scale for copper.
Mpuku explained that the major concern raised by the stakeholders had been that, mineral royalties are not sensitive to operational costs.
In order to smooth out the referred distortions, the 2023 national budget proposed to restructure the mineral royalty regime with respect to copper.
In the new structure, the royalty rates would now apply to the incremental value of each adjusted price band.
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