Zambian chamber: govt must accelerate VAT refunds for miners

Monday, 29 September, 2014

Zambia’s presence on these pages over the last year has been troubled, characterised mainly disputes of one kind and another with various mining companies.

However, early in 2014 the tone seemed to change a little as - amongst other minor indicators of positive progress - Zambia’s Deputy Minister for Mining, Energy, and Water Development, Richard Musukwa, detailed to guests of the UK's All-Party Parliamentary Group on Extractive Industries (APPG EI) that Zambia was “open for responsible business”. Other subtle developments this year appear to reinforce that message.

Now progress towards mutual understanding between state and the extractives sector has been given a strategic kick in the fundament by no less august a body than The Chamber of Mines of Zambia. The chamber’s calling on government to speed up refunds of withheld VAT subsequent to a ruling earlier this month that mining companies no longer need to produce import certificates from destination countries.

We highlighted the impact of the original regulation in a piece we posted in April. Back then, we wrote:

“It’s known that Zambia loses a lot of money to tax avoidance. In late 2012, then Deputy Finance Minister Miles Sampa went on record to say that the amount could be as much as $2 billion a year, and that the mining industry was the biggest culprit. The government beefed up tax laws in July 2013 and the fallout, including conflict between the government and Vedanta over the Konkola copper mines, has been documented on this site and elsewhere. Here's hoping for the sake of companies and communities that some kind of functioning balance can be reached sooner rather than later.”

- and perhaps that hope is on its way to fulfilment, via the discreet pressure of the Chamber. The Chamber's fundamental complaint: “mining companies [have] been meeting all the government requirements, yet refunds seem to be taking a long time to come to them.”

The Chamber has also noted publicly - perhaps pointedly? - that the mining sector must be nurtured to generate revenues needed for the country’s economic diversification - and Zambia is after all one of the world’s largest copper producers, so the lever is certainly there.

Speaking for the government, Finance minister Alexander Chikwanda has said that “the government had decided to relax the rule because it proved very hard to implement, mainly because it involved documentation from importers outside the country's jurisdiction.”

The recent article on mining.com goes on to say that outstanding refunds, “estimated to exceed $600 million,” should be paid within a year. Among companies waiting for the refunds are First Quantum Minerals, Barrick Gold, Glencore, Vale, and Vedanta Resources.

ENDS

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