  | |
| |
 |
|
| ||
Legal defence mooted on Zambia tax shock Posted: Sat, 09 Feb 2008 [miningmx.com] -- ZAMBIA’S government will not change its fiscal regime and has warned international investors not to pursue the matter through the courts, a path signalled by mining companies today. Mines minister Kalombo Mwansa said in an interview that international arbitration would probably "come to nothing" and asked mining companies to accept higher taxes. The mining community, however, has expressed deep unhappiness, especially firms who already have development agreements with the government. Zambia will produce a power-affected 600,000 tonnes of copper in 2008 against the possible 800,000 tonnes it could have produced if there were no power problems, Mwansa said. Zambia, a poor country, has decided to change the royalty and tax regime to generate more income for infrastructural spending and other development programmes. But the mining industry is less than happy, with some warning new projects could be threatened. The fiscal regime “won’t change,” Mwansa said on the sidelines of the Africa Mining Congress in Livingstone, Zambia. “We’ll have dialogue with the mining companies, but we will not change the fiscal regime”. Zambia has introduced a windfall tax on base metals at a minimum rate of 25% and has upped royalties to three percent of gross value from 0.6%. The new rates are effective from 1 April. Between $2.50 and $3 per pound of copper the windfall tax will come in at 25%. The tax rises to 50% between $3 and $3.50, climbing to 75% beyond that. The corporate tax rate will increase to 30% from 25%. “Nobody likes to pay tax, but that shouldn’t stop them from investing,” Mwansa said, adding Zambia had attractions other copper provinces might not, including a stable government and a sound legal system. Some mining companies have far more favourable tax regimes laid out in contracts signed years ago when Zambia was recovering from the effects of a botched privatisation. International arbitration A senior mining executive, who declined to be named because of the sensitivity of negotiations with the government, pointed out there was the option of international mediation if the contracts were changed without the consent of both parties. “We have development agreements in place and they still have a decade to run. We will go ahead with international arbitration if this fiscal regime goes ahead, but we trust it will not come to that,” the executive said. Mwansa said international arbitration would be the least favourable course of action. “I’d appeal to them not to do that and to not get into an antagonistic situation that will lead to nothing,” he said. “It is in their interests to work with us and stay in our good books.” Another mining executive speaking on condition of anonymity said the fiscal regime was now one of the worst in the world. It could prevent new entrants into the market, particularly given the jitters in the global lending market and a change in the risk perception of Zambia for the worse, he said. Power shortages Meanwhile, miners in Africa’s largest copper supplier, have been hit with power shortages. “There has been some effect,” Mwansa said, adding that plans were in place to ask ordinary electricity consumers and non-essential industries to conserve power so it might be sent to the mining sector, the largest foreign exchange earner for Zambia. Two companies have written to the mines ministry, warning of scaling back operations because of the power situation. Mwansa identified the companies as Metorex and Mopani. Zambia produced 520,000 tonnes of copper in 2007 and Mwansa said he expects output this year of about 600,000 tonnes. Click Here to subscribe to our daily newsletter
| ||||||||
0% 
