Friday January 11, 02:19 PM
Zambia president axes copper mine tax breaks
LUSAKA, Zambia (Thomson Financial) - President Levy Mwanawasa on Friday announced the cancellation of all tax concessions for copper mining companies operating in Zambia, saying they were 'unfair and unbalanced'.
Mwanawasa,
in his state of the nation address to parliament, said the development agreements which Zambia signed with foreign mining firms for tax concessions were not beneficial to his impoverished country.
'The government has, therefore, decided to introduce a new fiscal and regulatory regime in order to bring about equitable distribution of the mineral wealth,' Mwanawasa said.
Zambia signed legally-binding development agreements with various mining firms to pay fixed taxes for periods ranging from 15 to 25 years at time when copper prices were low at the international market.
'The new regime introduces a windfall tax and a viable profit tax that has been designed to work in periods of both high and low prices,' Mwanawasa said.
He said Zambia will now increase its tax rate for mining companies from 31.7 percent to 47 percent, which was still lower than the level in other copper producing countries.
'This effective tax rate will not adversely affect the companies' viability as their returns will remain well within the international norms,' the president said.
Mwanawasa said with the new measures, Zambia is expected to earn in excess of 400 mln usd in additional revenue in 2008 while another 250 mln usd will be earned from companies that had tax concessions.
He said if these cancellation of the tax concessions were not made by his government, mining firms would have earned 4 bln usd in the 2008/9 financial year but only pay tax to the tune of 301 mln usd.
The Zambian government will next month table a bill in parliament to enforce Mwanawasa's cancellations of the development agreements which most key mining companies signed with the government.
Copper contributes more than half to Zambia's domestic gross product.
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