The Zambia Revenue Authority (ZRA) still owes mining companies an outstanding US $600 million in unpaid VAT refunds, according to the Chamber of Mines.

Responding to a press query, Zambia Chamber of Mines president Nathan Chishimba disclosed that the country’s large-scale mining companies are collectively owed an outstanding US $600 million in unpaid VAT refunds.

He explained that from the total US $600 million, the industry is still owed US $400 million under the old VAT Rule 18 tax regime, a situation which he added continued to affect the working capital of mining companies.

VAT Rule 18 drew its legality from section 15 of the VAT Act, which stated that goods and services “described in the Second Schedule shall be zero-rated.”

Under the law, all exporters, including mining companies, are indirectly exempt from paying VAT by being “zero-rated”, meaning that although they have to register as suppliers of goods and services on which VAT is to be charged when they sell their goods, they charge VAT at a rate of zero per cent.

This means that in terms of VAT, they owe the ZRA nothing since they have collected no output VAT, but could claim back all the “input VAT” for each month.

“From the records we have as a Chamber, the industry is owed approximately US $400 million in refunds under the old Rule 18 regime, and approximately US $200 million post-the Rule 18 regime. This is obviously a matter of concern for our members, because as long as the debt persists, their operations will continue to be impacted by this significant pinch on their daily working capital through the withholding of these funds,” Chishimba stated.

“This cannot be good for the long-term health of the industry, and we implore the government and the ZRA to expeditiously resolve this matter.”

But when asked if the Chamber could confirm whether the ZRA has started to make payments against the outstanding amounts due, he said mining companies have not reported any significant reductions so far.

Last week, ZRA Corporate Communications Manager Topsy Sikalinda told News Diggers! in a statement that the Authority had refunded back over 80 per cent of the K7 billion to the mines paid between January and October this year.

“That is a very interesting statement because none of our members have reported any significant reduction, if at all, in the amounts they are owed. We are confident about the numbers because as late as last week we met as an industry and these numbers came up,” replied Chishimba, who is also Barrick Lumwana executive director.

“It has not been very easy to engage with the ZRA since the (2019) budget was announced, but this is clearly an issue that is not helping the industry in its current difficulties.”

Meanwhile, in a separate development, the ZRA stated that it has received “overwhelming responses” from members of the general public on the modalities of implementing the Sales Tax as contained in next year’s budget.

According to a statement issued by ZRA Acting Commissioner-General Bridget Muyenga, the Sales Tax policy was actually an idea proposed by the ZRA in a bid to migrate from Value Added Tax (VAT) to Sales Tax due to weaknesses and complications in its administration.

“The Authority is in full support of Sales Tax and the idea was originated by the Authority to migrate from VAT to Sales Tax, which will definitely be lower than VAT and benefit the ordinary Zambian citizens by paying a lower tax than the current VAT,” stated Muyenga.

“The Authority believes that Sales Tax will create a steady cash flow for both the business community and government unlike is with the case of VAT refunds where business entities have to wait for a refund in order to consistently operate.”

According to Muyenga, the Sales Tax will also help broaden the tax base and increase revenue contributions by all sectors and individuals in the entire value chain.

But stakeholders have roundly rejected the government’s proposal as businesses fear its feasibility being introduced on April 1 next year.

KPMG, the globally-renowned audit, tax and advisory services firm, earlier this month warned that government’s insistence to introduce the controversial Sales Tax next April will create uncertainty in the Zambian economy, which would be “very injurious” to business.