BUUMBA CHIMBULU writes
@SunZambia
THE decision to remove Value Added Tax (VAT) and replace it with Sales Tax has threatened the needed stability in the mining sector, says the newly released report for 2019.
The report has been prepared by the Premier Consult Limited consultant, Oliver Saasa, and Zambia Institute for Policy Analysis researcher, Shebo Nalishebo.
According to the report, the change in tax regime would result in the eminent rise in consumer prices on account of price cascading.
The report which released this week says that sales tax would also lead to production efficiency distortions with firms vertically integrating in an effort to minimise the effect of the tax and a reduction in tax revenue following the rise in collusive evasion among firms.
“Many of the 2019 changes in the mineral tax regime are likely to alter mining costs to the extent that taxes are a big component of the mining operation.
“The “tax cascading” effect will result in increased costs, which is likely to result in mining companies substantially scaling back their operations even further, which could lead to direct and indirect job losses,” said the report.
It concluded that a tax regime that unduly increased the effective tax rate was almost never conducive to long-term investment and, thus, to enhanced tax revenue generation.
Under the 2019 tax regime, said the report, the effective tax rate for Zambian miners could be over 105 percent if the copper price surpassed US$9,000 per tonne.
“Considering this and other factors, the new fiscal regime is unlikely to secure a sustained fiscal flow into the Treasury simply because its effects would drain investment in the sector.
“It will also slow down growth for the mining sector as well as for the larger; reduce both direct and indirect employment; and diminish tax revenue in the medium term,” said the report.
