|dc.description.abstract||Zambia is largely a mineral economy faced with challenges of designing a tax system
that meets two fundamental objectives namely to ensure a fair share of rent for itself and
simultaneously allowing for sufficient investment revenues needed by investors.
Zambia’s mine fiscal regime has evolved more than six times from privatisation time to
date with the aim of striking a win-win situation in the capturing of mineral rents. These
changes have not yielded satisfactory results since tax revenue captured has regularly
remained lower than 4 percent of the gross domestic product (GDP). The main objective
of this thesis is to examine the underlying reasons for the failure and how Zambia can
optimise its rent capturing as part of a solution to the current problems facing the copper
Literature reviewed highlighted various issues needed to optimise rent capturing from
the mining industry covering the theoretical concepts of economic rent, optimal taxation
and perspectives on “good tax” criteria as a condition for resource taxation.
Furthermore, literature review covered concepts dealing with a blend of key taxation
instruments and evaluation of their competitiveness, investment incentives, equity
participation arrangements, institutional capacities, and additional benefits to mineral
taxation clarified by social investment and local content.
Data was collected from a range of “experts” in the mining industry through a survey by
semi-structured interview and structured questionnaire employing a non-probability
purposive sampling for both. Thirteen interviews were conducted and 120 questionnaires
were distributed to people covering the same scope of sources of information, to obtain
experts’ views based on the study objectives informed by the literature reviews. Out of
these, 82 responses were received.
Results were achieved based on literature reviews, interview and questionnaire survey,
competitive assessment of the mine fiscal regime using international best practice and
quantitative evaluation of the fiscal regime through a stylised copper model. The study
established that optimal capturing of rent in Zambia is devoid of a “best taxation” model
for arguing taxation matters. Additionally, the study ascertained the underlying reasons
for Zambia’s failure to capture optimal rent including; poor design of the tax regimes
that are inflexible to meet economic perspectives, improper evaluation of granted tax
incentives, weak institutional capacities affecting tax administration and sector
monitoring, dismal equity stake performance, and suboptimal performance of non-fiscal
benefits dealing with social investment and local content.
These findings have significant implications for designing and performance of the
Zambian mine taxation system and it is concluded that Zambia’s mineral fiscal regime is
not adequately structured to optimise rent capturing consistent with the interests of both
investors and government.
Inductively, the study proposes a guide for the appropriation of an optimal government
share of rent through the need to have parameters for fiscal stability, transparency and
progressivity in the design of fiscal regime, maintaining headline fiscal tools consistent
with global norms and instituting the excess-profit tax indexed to price movements.
Other indicators include, satiated cost-benefit analysis for the offered tax incentives,
government assuming equity stake in new and viable mineral projects, and need for
strengthening institutional capacities.||en