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Zambia budget to discuss copper mine windfall tax

LUSAKA, Jan 7 (Reuters) - Zambia’s Finance Minister Situmbeko Musokotwane told Reuters on Wednesday he will raise the issue of a 25 percent windfall tax on copper mine operators in the national budget.

The Chamber of Zambia Copper Mines, which represents the interests of foreign mining investors, has submitted proposals to Musokotwane proposing the controversial windfall tax to be scrapped and the 15 percent profit variable tax zero rated.

Musoktwane confirmed receiving some proposals from the mines but declined to offer further details.

“The timing is not good to discuss (the tax) issues because I will address them in the budget,” Musokotwane told Reuters.

Zambia’s national budget is due at the end of January.

A document obtained by Reuters comprising proposals for cutting taxes showed that the copper mines also want the mineral royalty rate to be graduated according to the copper prices.

The mining firms suggested that corporate tax be cut to 25 percent from 30 percent. The mine owners also want the government to suspend 25 percent excise duty on diesel and to waive road levy on diesel imported for use in the mines.

Zambia last April introduced the 25 percent windfall tax and 15 percent profit variable tax on income above eight percent. The country also raised mineral royalty to 3.0 percent from 0.6 percent and corporate tax to 30 percent from 25 percent.

The taxes caused controversy with some mining firms threatening to take legal action, saying the government had abrogated development agreements it signed with the firms to maintain low taxes.

Firms operating in Zambia include Canada's First Quantum Minerals FT.MO, Australia's Equinox Minerals Ltd. EQN.AX Swiss firm Glencore International AG [GLEN.UL] and London-listed Vedanta Resources Plc VED.L, the country's largest copper producer.

Industry experts say mining firms have told the government that they were facing serious operational difficulties due to the higher taxes, high electricity tariffs and fuel prices and low global metals prices.

“The Chambers of Mines has brought these and other problems to the attention to the (finance) minister and are awaiting government action on the specific interventions that they have suggested,” the proposals said.

Mosokotwane said the setbacks seen in Zambia’s mining sector, which forced Luanshya Copper Mine to halt cobalt and copper operations, were temporary and that Zambia would still attract more investments in mining in the future.

“The current cycle (of low prices) is a temporary factor. For us what is key is to maintain the interest of those that have invested in our country. The future is very bright and we will still attract plenty of investments in the future,” Musokotwane said.

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