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Tax incentives for Zambia’s mining industry must constantly be reviewed to ensure those which no longer serve or have served their purpose are phased out.
Not constantly reviewing these tax incentives deters tax morality in the rest of the sectors.
This is according to a latest report by the Tax Justice Network (TJN) Africa released this month titled “Taxing Zambia’s Mining Sector for the Energy Transition: Opportunities and Challenges,” collaboratively produced with Publish What You Pay Zambia recently.
The report stated that maintaining incentives which appeared to unreasonably favour a particular sector at the expense of tax revenue deterred tax morality in the rest of the sectors and therefore may encourage tax evasion.
“Given the short time period for the holiday (five years), the effectiveness of these incentives is questionable.
“It also increases monitoring costs for the already resource-constrained Zambia Development Agency (ZDA) unnecessarily. It also causes serious distortions and inequities in corporate taxation,” the report stated.
Read more: Policy group calls for greater transparency in Zambia’s mining industry
According to the report, Zambia’s mining sector currently had an array of incentives.
It cited that through the Income Tax Act and the Zambia Development Agency (ZDA), a number of tax incentives were given to specific classes of investors in order to attract investment into the economy.
“However, several studies have shown that the incentives may not have the intended effects. Some incentives may also be given based on the lobbying prowess of the intended beneficiary.
“With limited monitoring capacity by the ZDA, maintaining incentives which appear to unreasonably favour a particular sector at the expense of tax revenue deters tax morality in the rest of the sectors and therefore may encourage tax evasion,” the report stated.
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