A critical analysis of the implication of taxation stability under mining development agreements on levying of rates on mining property in Zambia
Kabuka, Charles Wale
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The privatization of the mining industry posed a great challenge to the Government of the Republic of Zambia. At the time of privatization, the mines under ZCCM were in bad shape and Government had to entice large-scale mining investors through the creation of a number of incentives. The Mines and Minerals Act of 1995 introduced several incentives for this purpose. The Act as amended by the Mines and Minerals (Amendment) Act (No. 41) of 1996 under section 9 allowed the Government to enter into individual development agreements with individual companies to ensure that further incentives are extended to companies based on their unique requirements. One of the most important clauses in these mining development agreements is on taxation stability. Under this clause, the Government undertook not to impose new taxes on the mining companies for a period of fifteen years. Arising from this clause is a dispute between the councils and mining companies with the later refusing to pay property rates. They argue that since the property rates for mining property was reintroduced in 1999, its imposition on companies who signed their agreements before 1999 will be tantamount to introducing new tax contrary to spirit of the development agreements. On the other hand, councils have insisted that the taxation stability under the development agreements does not extend to property rates and that it is requirement that the companies pay rates in accordance with the provisions of the Rating Act. This study analyzed the implications of the taxation stability clause under the mining Development Agreement on levying of rates on mining property by local authorities. Although the Mines and Minerals Act has been amended to delete the section which allowed stability commitment, the contracts signed before the amendment are still subsisting and binding. However, our findings revealed that the Rating Act is the enabling Act in matters related to property rates. Exemption of properties from rates can only be done by the Rating Act and not through another Act. It was also learnt that the taxation stability clauses do not apply to all taxes. It was therefore concluded that mining companies regardless of when they signed their agreements are liable to pay property rates to local authorities.
- Law