Lusaka, Zambia — MININGREVIEW.COM — 12 May 2010 – The government of Zambia has announced that it will not reintroduce the controversial mining windfall tax it scrapped in 2009 when copper prices rose sharply, despite pressure to do so from opposition parties.
The introduction of a 25% windfall tax and other taxes in 2008 was backed by the World Bank to help Zambia raise funds required to build schools and roads, and to provide health and education services in the poor southern African country.
Mines minister Maxwell Mwale said here that although countries like Australia had introduced a tax similar to windfall tax, Zambia would not do so again, and he hoped investors leaving Australia would explore mining opportunities in Africa’s top copper producer.
Australia has angered its booming resources sector, including BHP Billiton and Rio Tinto, by unveiling a new tax on mines from July 2012 under a sweeping pre-election tax overhaul which will also boost pension savings for workers.
“Those calling for the reintroduction of windfall tax in Zambia do not know what it takes to run a government,” Mwale said after meeting officials of First Quantum Minerals.
“In 2008 when we imposed windfall tax we saw a decline in mineral exploration and we don’t want that to happen again “’ we need to attract investors,” he added.
First Quantum resident director, Kwalela Lamaswala said the windfall tax raised production costs for mining companies and that scared away investors. “The windfall tax was a very retrogressive tax and we are very happy the government has realised this,” Lamaswala said.
In 2008, Zambia introduced a 15% profit variable tax and a 25% mineral windfall tax, and raised corporate tax from 25 to 30% and mineral royalty from0.6 to 3.0%, upsetting foreign mining firms.