In Zambia, mining development agreements were negotiated with private mining investors who took over copper mines after the privatisation of the Zambian copper industry in 1998.They offered huge tax exemptions to mining companies – including setting royalty rates at 0.6 per cent and corporate income tax at 25 per cent, instead of the 3 per cent royalties and 30 per cent corporate tax specified in the Mining Act. Despite booming international copper prices between 2003 and 2008, these tax breaks have drained government coffers of much-needed revenue for development spending. In 2004, for example, the government collected only US$8 million in tax and royalty revenue from the copper mining industry.
In 1992, a year when copper production and international copper prices were at similar levels to those in 2004, budget revenue from taxes and royalties was US$200 million, in large part due to higher tax collection from the mines.
Civil society actors in Zambia, including the then Civil SocietyTrade Network of Zambia (CSTNZ), churches and trade unions, took up this issue.They published research reports, engaged parliamentarians and the media and raised the level of debate in the country on the issue of tax exemptions in the mining sector. Partly as a result of this successful civil society lobbying and campaigning, in 2008 the government decided to outlaw the special tax breaks granted to copper mining companies in the mining development agreements, requiring the companies to instead revert to paying the 3 per cent stipulated in the law. A special windfall tax was also introduced by the government, but it dropped this a year later under pressure from the mining companies, partly in response to the huge drop in international copper prices. While this setback reduced the overall tax revenue paid by the mining companies, in 2009 the finance minister reported that the government collected US$77 million in tax and royalty income from copper mining companies as a result of the new tax rates – a ten-fold increase compared to 2004.