10Sep 2017

COMPETITIVENESS EVALUATION OF THE ZAMBIAN MINING TAXATION SYSTEM.

  • Copperbelt University, School of Mines and Mineral Sciences, Kitwe, Zambia.
  • University of Zambia, School of Mines, Mining Engineering Department, Lusaka, Zambia.
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Fiscal regime is one of the key features of mineral policy investors assess when considering investing in a specific jurisdiction. A competitive and equitable fiscal regime from an investor?s perspective attracts foreign direct investment (FDI) in the extractive industry of a country. This research aimed at examining the competitiveness of the June 2016 Zambian mine tax system in relation to different jurisdictions. The method of study employed quantitative evaluation of the country?s mine tax system based on financial modeling of a stylised copper mine to assess the distribution of the tax burden between investors and the Zambian government. Quantitative modeling results of the hypothetical model showed that Zambia has a comparable and competitive effective tax rate (ETR) at 54.5 percent falling within the range of the World Bank?s optimal estimates (40-60%) based on the employed assumptions in the copper model. The study further revealed that mine taxation system was regressive with mineral royalty tax, operating costs and commodity price and was fairly neutral with respect to capital expenditure and corporate income tax. The noted low correlation between ETR and the used headline taxes indicated that headline taxes should not be treated discretely as bases for taxation regime design. A combination of elements in the mineral taxation policies is what determines the competitiveness and overall government returns from a project. The study recommended that Zambia needs to strengthen its institutional capacities to enhance tax administration, policy formulation and mining sector monitoring.

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[Edward Chisakulo and Dr. Stephen Kambani. (2017); COMPETITIVENESS EVALUATION OF THE ZAMBIAN MINING TAXATION SYSTEM. Int. J. of Adv. Res. 5 (Sep). 359-372] (ISSN 2320-5407). www.journalijar.com

Edward Chisakulo
Copperbelt University, School of mines and Mineral Sciences, Kitwe, Zambia.

DOI:

Article DOI: 10.21474/IJAR01/5338      
DOI URL: http://dx.doi.org/10.21474/IJAR01/5338

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