Evaluation of Zambia's mineral taxation regimes: A case study of Lumwana mine

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Banda, Webby
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University of Zambia
There has been a lot of outcry from the public that Zambia’s mineral tax reforms, with an aim to optimize revenue benefits from the mines, have not yielded the desired results. This has mainly been attributed to the weak design of its legislated mineral taxation systems. Due to this underlying reason, this research aims at evaluating Zambia’s mineral taxation regimes with an objective of assessing their robustness so as to ultimately determine that which is sturdiest in design. This research brings forward a well compiled methodology of evaluating mineral taxation regimes. It also possesses the potential of acting as a future reference of optimizing Zambia’s mineral taxation. The evaluation was based on Lumwana Mine and encompassed five criterions. These included neutrality, progressivity, revenue raising potential, government risk and investor perception of risk. These measures were selected as criteria for evaluation because they best capture and define the revenue generating objective of a taxation regime. The evaluation framework employed spreadsheet modelling and was anchored on two state of affairs which include the status quo and worst case scenario. The research has reviewed that the Post-2015 mineral taxation system is the most robust in design. This is because of its robust tax structure which exhibits proper synergy and harmonization of its taxation instruments. To the contrary, the 2008 tax regime is the weakest in design. This has been attributed to its weak tax structure that demonstrates a blending incapacitation of its taxes. Overall results indicate that Zambia’s mineral taxation systems except the 2008 regime are relatively robust in capturing mining revenue. It can be concluded that it is not a single tax that affects a mineral fiscal regime but the lump sum of all taxes and how they harmonize with each other. This is because the advantage of one tax instrument can douse the disadvantage of another and vice versa. The study recommends that there is need to review and optimize the Post-2015 mineral taxation system, increase the institutional capacity of Zambia Revenue Authority (ZRA) and strengthen the Zambia Extractive Industry Transparency Initiative (ZEITI).
Thesis in mining
Mines and mineral resources--Taxation--Law and legislation--Zambia , Mineral industries--Taxation--Handbooks, manuals, etc. , Mineral industries--Taxation--Zambia , Natural resources--Taxation--zambia