Zambia is delaying implementation of the new sales tax structure until January 2020 to allow for further fine tuning of the law. Zambia, Africa’s second-largest copper producer, is proposing to replace an existing value-added tax with a non-refundable sales tax. Against the backdrop of stiff resistance to the proposal from businesses, the move has been kept in abeyance. Zambia has withdrawn the draft law and may re-introduce it in the next session in September, the ministry of finance said in a statement. In the meantime, the government would address the concerns in the Sales Tax Bill raised by the stakeholders. Zambia’s mining industry fiercely opposes the tax. Tax is one of the major irritants aired by the mining industry of Zambia. The government has proposed an across-the-board 9% tax on sales of goods and services, originally due to be introduced in April, was intended to help rebalance Zambia’s debt-laden economy.
Another sore point between the government and businesses is the ownership dispute over Konkola Copper Mines. Zambia’s national mining vehicle, ZCCM, is seeking to have Vedanta subsidiary Konkola Copper Mines (KCM), its partner in the country’s largest copper mine, placed into liquidation. Vedanta is seeking to have the case referred to arbitration in South Africa. The Zambian government, has accused KCM of underpayment of dividends and taxes, as well as underinvestment in the mine. A liquidator was also appointed by the government to run the company in May. The liquidator is trying to sell Vedanta’s 80% stake in the mine. Chinese, Turkish and Russian firms are keen to buy it. However, a South African court has ruled that the sale process should be halted but the government has pressed on notwithstanding the order.
Claims and counter claims are aired by both parties . Zambian tax authorities, according to some reports, indicate that Vedanta owes about $100m (£82m) in VAT, customs duties and other taxes, even once refunds due to the company were taken into account. The company is also criticized for lack of preparedness for pollution and has also withheld US$10m (£8.2m) in dividend payments.
Vedanta’s version is that it paid US$164m (£139m) to the Zambian Revenue Authority and had not been informed about outstanding payments it was required to make. It said it had paid US$2.3bn (£1.9bn) in wages,US $1.2bn (£1bn) in power bills and US$700m (£576m) in taxes and royalties since 2006, as well as US$72m (£59m) in dividends.
It however has admitted it had made local suppliers wait for payment but blamed this on the financial stresses caused by the tripling of power costs, tax increases, import restrictions on copper concentrate and the government’s failure to pay VAT refunds.
