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Zambia mining industry wants better public understanding of Mineral Royalty Tax (MRT)

In a bid to improve public understanding of mining taxation, and promote informed comment, the miners-zambiaZambia Chamber of Mines today released a report entitled “A guide to understanding Mineral Royalty Tax (MRT)”.

The short, 15-page report is available free of charge from the Chamber of Mines’ offices, and as a downloadable PDF on its website www.mines.org.zm.

It is the first time that the industry body has proactively sought to spark public debate on an issue that is critical to its long-term survival, and heralds a more proactive and strategic approach to communication.

The release of the booklet comes barely three weeks after the government announced its intention to unveil a new, more accommodating MRT regime for the industry.

Chamber of Mines president Nathan Chishimba said: “We commended the Government for announcing a sliding scale for the determination of MRT rates, linked to the prevailing copper price. For the public to really appreciate the significance of this move, the whole subject of mining taxation, and MRT in particular, needs to be better explained.

“MRT has been a hot topic. We want to set out the cold facts, so Zambians can better understand a critical issue affecting the mining industry, and the wider context of tax and investment in which the issue is situated.”

He added: “This report signals a more proactive approach by our 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 crisis facing the global copper-mining sector. There will be more such initiatives as the industry continues to engage constructively with stakeholders and the broader public.”

A guide to understanding Mineral Royalty Tax (MRT) is designed for a lay audience, and deals with the subject broadly rather than in complex detail. It covers the present situation in Zambia, explains the motivations and mechanics of MRT, and gives an outside view of our mining-tax system by the IMF and World Bank, and ends with some thoughts on the future of the mining industry.

Among the key learning points of the report are the following:

  • MRT is used by many countries around the world, and always exists alongside a tax on profit – together, the two taxes assure a stable flow of tax revenue throughout the life cycle of a mine;
  • unlike normal company tax, MRT is levied on revenue rather than profits; therefore, it is payable even when mines are marginal or loss-making;
  • mines can take several years to become profitable and pay profit-based tax, so MRT is an effective way for governments to get upfront short-term tax revenue; and
  • unlike a profits-based tax, MRT is a cost to the business. A rate that is too high can stifle economic activity and employment, discourage further investment, and diminish the long-term tax pipeline.

The report also considers Zambia’s approach to MRT in comparison with other mining jurisdictions.

 

 

 

 

 

 

Copyright (c) 2016 MCMM Publishers