RECONCILING MINERAL ROYALTY TAX REVENUE AND INWARD FOREIGN DIRECT INVESTMENT

Authors

DOI:

https://doi.org/10.37335/ijek.v13i1.297

Abstract

Zambia’s mining sector is crucial to its economy, significantly contributing to national revenue and foreign direct investment (FDI). However, the country has struggled to balance mineral royalty tax (MRT) revenue generation with attracting and retaining FDI. This study develops the Taxation and Investment Reconciliation Theory (TIRT) as a strategic framework for balancing taxation policies and investment incentives in resource-rich nations. Using a mixed-methods approach, integrating econometric analysis and qualitative insights from policymakers, investors, and mining firms, the research examines the impact of MRT regimes on FDI inflows in Zambia. The study employs a convergent parallel design and applies an Autoregressive Distributed Lag (ARDL) model to time series data to analyse how changes in royalty tax structures influence investment decisions and government revenue. Additionally, it evaluates policy inconsistencies and investor perceptions of Zambia’s fiscal framework. A key outcome is the TIRT model, which incorporates international best practices and empirical data from other resource-rich economies to establish a sustainable taxation-investment balance. Findings highlight that predictable, stable, and flexible tax policies are essential for aligning government revenue objectives with investor confidence. The study emphasises the importance of political stability and stakeholder interests in achieving a sustainable mining sector. It concludes by recommending a policy framework that aligns Zambia’s MRT with long-term FDI growth, ensuring a robust and sustainable mining sector. This research contributes to the discourse on mineral taxation in developing economies, offering a practical model for optimizing both revenue generation and foreign investment.

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Author Biographies

Oscar Kaonga, Graduate School of Business, University of Zambia, Lusaka, Zambia

Email: oscarkaonga@gmail.com

PhD Student at the University of Zambia, Graduate School of Business in Lusaka, and Head of Business and Finance Department in the Ministry of Education in Zambia. He has over fifteen years of teaching experience in Business and Accounting and has authored a number of academic books at the higher educational level. Oscar holds a Master of Business Administration in Finance, a Bachelor of Accounting Degree, the Zambia Institute of Chartered Accountants (ZICA) qualification, as well as a Diploma in Business Studies Education.

Lubinda Haabazoka, Graduate School of Business, University of Zambia, Lusaka, Zambia

Email: lhabazoka@yahoo.com

Senior Lecturer and Director at the University of Zambia’s Graduate School of Business. He is also a former President of the Economics Association of Zambia (EAZ). He holds a Master of Science in Finance and Credit (Banking specialization) and a PhD in Economics (Banking focus) from Rostov State Economics University, Russia. Dr. Haabazoka has conducted research on economic policy, finance, and banking.

Bwalya Chilolo, Graduate School of Business, University of Zambia, Lusaka, Zambia

Email: bwalyachilolo@yahoo.com

Lecturer at the Graduate School of Business of the University of Zambia in Lusaka and former Chief Executive Officer (CEO) of Mulungushi Village Complex Limited (MVCL). He has over ten years of teaching experience at the University level and has vast experience in supervising research at Phd and master's levels.

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Published

2025-06-30

How to Cite

Kaonga, O., Haabazoka, L., & Chilolo, B. (2025). RECONCILING MINERAL ROYALTY TAX REVENUE AND INWARD FOREIGN DIRECT INVESTMENT. International Journal of Entrepreneurial Knowledge, 13(1), 72–94. https://doi.org/10.37335/ijek.v13i1.297