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Zambia's new mining tax regime could backfire

Thursday, February 12, 2015

Significance

The new rules remove corporate tax, but hike mining royalties to 20% for open pit mines (up from 6%), and 8% for underground mines (also up from 6%). Some flexibility in the payments schedule may be permitted.

Impacts

  • The collapse of the opposition MMD's support base means business lobby funding and support is likely to shift to Hakainde Hichilema's party.
  • Following his declared support for the PF, Rupiah Banda's moderating influence on party policy may be limited by his outsider status.
  • The IMF will be wary of confirming a fiscal consolidation programme, given the president's short tenure and his populist platform.
  • Lower fiscal revenues from mining may push the government to borrow further to meet its election campaign promises.
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