A slide in global copper prices has put pressure on Africa’s second biggest producer of the metal, with export earnings depressed despite the kwacha’s 55 percent fall against the dollar this year.
The finance minister cut his original revenue target by 2.12 billion kwacha in June, and on Wednesday Zambia Revenue Authority (ZRA) commissioner general Berlin Msiska suggested the shortfall could be bigger.
“I think it’s fair to say, taking the economic fundamentals into account, it necessitates revisiting the numbers,” he told Reuters on the sidelines of a conference in Johannesburg.
“In means that when you look at the fiscal table the government ends up with a wider financing gap.”
Msiska told the conference that the ZRA had forwarded proposals to the finance ministry for regulations to prevent multinationals from using transfer pricing to evade paying taxes.
Transfer pricing happens when multinationals sell to their parent or subsidiaries abroad at lower prices leading to declaration of lower earnings or even losses, avoiding the payment of billions in tax revenues.
“Out of 16 percent of GDP that we collect in revenue, the mining sector contributes 2 percent, and that is taking corporate income tax and mineral royalties together,” Msiska said.
“That in itself is a big concern. The perception is that multinationals are not paying their fair of tax.”
In July, the mining industry said an increase in corporate tax to 35 percent and other new tax rules would scare away investors and discourage processing to add value, calling for them to be scrapped.
Some of the foreign firms running mines in Zambia include Glencore, Barrick Gold Corp, Vedanta Resources and Canada’s First Quantum Minerals. ($1 = 9.9250 Zambian kwachas) (Editing by James Macharia)