Zambia to meet foreign mining firms on tax row

By Haggai Chilabi

LUSAKA, February 14 (Reuters) - Zambian will invite foreign owners of copper mines to talks to resolve a dispute over new taxes after some mines threatened to seek international arbitration, President Levy Mwanawasa said on Wednesday.

But Mwanawasa said that owners were being unfair in rejecting the new taxes -- which include a minimum 25 percent windfall profit tax -- and warned that government wanted a fairer share of income from its minerals resources.

"I am unable to understand how they can criticise us when we are asking for a fair share of our resources," Mwanawasa told reporters.

"I invite them to see the minister of finance and the minister of mines, let them come prepared, let them show that our rate of taxation is the highest in the world . . . some countries have taxation as high as 51 percent."

Zambia announced a windfall tax on base metals in January at a minimum rate of 25 percent and increased mineral royalties to 3 percent from 0.6 percent, effective April 1, 2008.

It also mooted a variable profit tax at 15 percent on taxable income above eight percent and raised corporate tax to 30 percent from 25 percent. The move will effectively raise mining taxes to 47 percent from the previous 31.7 percent.

On Tuesday, foreign mine owners told a parliamentary watchdog committee that they rejected the proposed taxes and threatened to seek international arbitration to resolve the stand-off, saying that had not been consulted on the proposals.

Mwanawasa said foreign managers at the vast copper and cobalt mines -- the southern African nation's economic mainstay -- received huge salaries, while denying Zambians jobs in higher management positions.

"They might be happy now with the salaries they are getting, (but) what of the majority Zambians?. Is it wrong for Zambians to ask for more so that we can improve the living conditions for all Zambians?" he said.

First Quantum Minerals (FM.TO) country manager for Zambia, Chisanga Puta-Chekwe, a local citizen, said the Canadian-based firm will ask to renegotiate its 15-year agreement on low taxes with Zambian authorities.

Some foreign companies had previously negotiated tax exemptions for periods between five and 20 years. (Additional reporting By Shapi Shacinda, editing by Gordon Bell and William Hardy))