Zambia makes U-turn on sales tax plan in concession to miners

Zambia has decided against replacing its value-added tax (VAT) with a non-refundable sales tax, a move that has been regarded as a major concession to mining companies opposing the tax reform.

In a budget speech on Friday, Finance Minister Bwalya Ng’andu said: “Government has decided to maintain the value added tax, but address the compliance and administrative challenges.”

Since his appointment in July, Ng’andu has sought to repair relations with players in the Zambian mining sector, after the proposed changes to the tax system were met with fierce opposition.

The minister also said government would remove a tax on capital equipment and machinery for mines, and reduce the capital allowance claimed by mining companies for capital expenditure to 20% from 25%.

Ng’andu announced Zambia’s latest budget against a backdrop of high debt levels and the continued effect of a severe regional drought, which has dented economic growth.

Zambia, Africa’s second largest copper producer, is targeting GDP growth of at least 2% this year and 3% in 2020, after a drought affected crop production and electricity generation at hydropower plants.