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Zambia Reaches Deal With Mining Companies Over Tax Regime

By on December 3, 2010

Mining companies have agreed to pay taxes based on the amended last year, and to pay at least 967.8 billion kwacha ($205 million) in tax arrears.
The Zambian government has reached a deal with copper mining companies over the implementation of a new mining tax regime, which raised mining taxes and royalty fees. Zambia, Africas largest copper producer, in 2008 introduced a 25% windfall tax as well as a 15% variable profit tax. The Windfall Tax targets extra profits gained by mining companies when the world prices exceed their normal trend. So it was scrapped a year later after global copper prices fell. It also raised royalties for mining companies from 0.6% to 3% and increased the corporate tax rate to 30% from 25%.
According to Zambias Chamber of Mines Director Fredrick Bantubonse, the government negotiated with mining companies on an individual basis and signed different deals with them.
“This was not a collective agreement,” he said, adding that since companies negotiated directly with the government, the chamber believes they negotiated favorable terms and are thus satisfied.
However, the Chamber of Mines insisted that the government guarantee a stable and competitive fiscal regime in order to boost investor confidence and attract more investments in the sector.
According to Musokotwane, Zambia’s Finance and planning minister Situmbeko Musokotwane
the government has agreed to ensure that the effective tax liability does not exceed 47% for the mining sector, and to maintain the current tax regime for the next ten years in order to provide fiscal stability for the sector, he added. That means the government will maintain the 15% variable profit tax, the 30% corporate tax rate and royalty rate of 3%. Major copper mining companies operating in Zambia include London-listed Vedanta Resources PLC (VED.LN), Toronto-listed First Quantum Minerals Ltd.(FM.T), Equinox Minerals Ltd.(EQN.T), China Nonferrous Metals Co. (8306.HK) and Swiss commodity trader, Glencore International AG. (Dow Jones)

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