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Zambia may cut mining taxes

The Kansanshi copper
project in Zambia
Lusaka, Zambia — MININGREVIEW.COM — 21 January 2009 – The government of Zambia is considering the possibility of cutting mining taxes – a step which has been advocated by foreign investors in the country’s struggling mining industry, but opposed by the International Monetary Fund (IMF).

In a state of the nation address to parliament in the Zambian capital, President Rupiah Banda revealed that the government was involved in discussions 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 that it can to protect jobs and to safeguard the industry for the future,” Banda emphasised.“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 taxes if thousands of jobs are lost as a result.”

The IMF has urged Zambia not to cut the controversial taxes, despite pressure from copper mines to abolish the taxes, which 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%, and to reduce corporate tax from 30 % to 25%. The companies involved include Canada’s First Quantum Minerals, Australia’s Equinox Minerals, Swiss firm Glencore International AG, and London-listed Vedanta Resources Plc.