MAC: Mines and Communities

Corporate pressure may succeed on Zambian government

Published by MAC on 2009-01-19

The World Bank/IMF is traditionally a strong supporter of mining. One might therefore find it ironic that the Bank is criticising Zambia's president for apparently succumbing to industry ressures to reverse the government's recent imposition of higher mining related-taxes.

Zambia may cut mining taxes, President says


16th January 2009

LUSAKA - Zambia's president said the government may cut mining taxes, a step advocated by foreign investors in the struggling mining industry but opposed by the International Monetary Fund (IMF).

In a state of the nation address to parliament on Friday, President Rupiah Banda said the government was in talks with mine owners on the best way to mitigate the impact on mining of higher taxes, introduced in 2008, and of low global metals prices.

"The government is currently engaged with the industry to make sure that a beneficial financial environment exists for both the government and investors," he said.

"My government will do all it can to protect jobs and to safeguard the industry for the future," Banda said.

"We must ensure that we do not kill the goose that lays the golden egg. There is little point in taking in a few million dollars in tax if thousands of jobs are lost as a result."

The IMF this week urged Zambia not to cut taxes, despite pressure from copper mines to abolish the controversial mining taxes that were introduced because of a need to increase spending on infrastructure.

Foreign owners of Zambian copper mines want the government to scrap a 25% windfall tax and 15% profit variable tax on taxable income above
8 percent, and to reduce the 30% corporate tax to 25%.

Foreign firms operating in Zambia include Canada's First Quantum Minerals, Australia's Equinox Minerals Ltd., Swiss firm Glencore International AG and London-listed Vedanta Resources Plc, the country's largest copper producer.

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