Tuesday, September 8, 2009

Mine firms in Zambia cheer move to limit taxes

By: Reuters, 27th August 2009

LUSAKA - A decision not to reintroduce a windfall tax in Zambia will spur fresh investments in Africa's largest copper producer as metals prices rally on the global market, an industry official said on Thursday.

Nathan Chishimba, president of the Chamber of Mines of Zambia (CMZ), which represents foreign mining firms, said the decision announced by mines minister Maxwell Mwale, was good for policy stability.

In a bid to boost foreign mine investment, Zambia said on Tuesday it would not reintroduce the controversial windfall tax it applied when copper prices rose last year, despite the current rise in world metals prices.

"We are confident that a well considered policy stance along the lines outlined by (Mwale) will enable Zambia to have a mutually equitable tax regime that recognises national interest and provides an atmosphere that accommodates a favourable investment climate," Chishimba told Reuters.

Chishimba said it was "unfair" to mining companies for the government to base policy considerations for the industry only on the price of copper.

Last year, Zambia introduced a 15% profit variable tax, 25% mineral windfall tax and raised corporate tax to 30% from 25% and mineral royalty to 3% from 0,6%, upsetting foreign mining firms.

Zambia said two weeks ago it will not refund foreign mining companies the millions of dollars they paid in taxes when the tax was in force, but could revise existing taxes in October during the budget for 2010.

Copper mining is Zambia's economic mainstay and the mines are a major employer for many of its 12-million people.

Some of the foreign mining companies operating in Zambia include Canada's First Quantum Minerals, London-listed Vedanta Resources Plc, Equinox Minerals and Glencore International AG of Switzerland.