Only two out of Zambias top nine large scale mining companies have been declaring profits in the country, meaning that only two mines pay corporate income tax, making the proposal of anchoring mining taxation on corporate income tax an academic exercise.
Zambia Revenue Authority (ZRA) commissioner General Kingsley Chanda disclosed during the 2021 Mining Indaba held in Lusaka last month that only two mining companies and one smelter are currently declaring profits in the country. He however did not name the two profitable mines.
But a check by the Zambian Business Times – ZBT has revealed that only First Quantum Minerals (FQM) Mines (Kansanshi and Trident Kalumbila mines) and Barrick’s Lumwana Mine, are declaring profits, with the others financial report and declarations to ZRA showing unprofitable bottom lines.
This is a scenario that has made Mineral Royalty Tax – MRT the only viable tax option to employ if the Zambian treasury is to collect any form of taxes from the other seven large scale mines. MRT is a revenue tax that is levied on sales volumes with reference prices being derived from internationally renowned London Metal Exchange – LME.
According to the Ministry of Mines and Minerals Development, which collects month on month production data from all mines in Zambia, ZBT confirmed that Zambia currently has nine top or large scale mining companies.
The large scale mining companies include [in no particular order] Konkola Copper Mines – KCM, Lubambe Copper Mines, Kansanshi Mine, Lumwana Mine, Mopani Copper Mines, Kalumbila Mine, NFCA, SINO Metals Leach Plant and CNMC Luanshya Mine.
It is also notable that non of the Chinese owned and controlled Mines are declaring profits in their operations, raising questions on their strategic and long term ability to contribute to growing the Zambian treasury, which is used to finance public infrastructure.
Chinese owned mines [NFCA, Sino Metals Leach plant and CNMC Luanshya mine] make up three out of the top nine (one third) of the large scale mining companies in Zambia. This is a significant portion that needs to become profitable and contribute to boosting public finances which need to expand to meet the needs of a growing population.
Chinese owned mines have since been challenged to work on their corporate social responsibility expectations as well as transparency in their financial reporting so that communities in which they operate can benefit. They need to start contributing significantly through both MRT and Corporate Income Tax – CIT to the Zambian treasury.
Some mining experts have called on the review of individual tax accounts of all of Zambia’s top mining companies to investigate if some mines are net contributors to the tax revenue pot. This follows the trend were some mines pay MRT but continue to draw large sums of Value Added Tax – VAT refunds from the Zambia Revenue Authority – ZRA.
