Zambia Said to Mull Replacing Mine Tax With Higher Royalties

Zambia, Africa’s second-biggest copper producer, is considering raising its mineral-royalty rate and removing corporate tax for mining companies, a person with knowledge of the matter said.

The government may increase the 6 percent royalty rate charged on sales as it would be simpler to administer and more transparent than corporate income taxes, the person said, asking not to be identified as a decision hasn’t been made yet. Zambia doubled mineral royalties to the current level in 2011.

The Finance Ministry’s medium-term budget plan shows non-tax revenue, of which mineral royalties are the biggest contributor, is projected to rise to 9.1 billion kwacha ($1.5 billion) next year from 5.1 billion kwacha in 2014. Corporate income tax from mines will drop to zero in 2015 and the following years from an estimated 2.3 billion kwacha this year, according to the document published in August.

Finance Minister Alexander Chikwanda may provide clarity on the royalties plan in his annual budget speech on Oct. 10, the person said. Fredson Yamba, the Treasury secretary, declined to comment when contacted today.

First Quantum Minerals Ltd., based in Vancouver, is the biggest copper producer in Zambia, while Mopani Copper Mines, a unit of Baar, Switzerland-based Glencore Plc, and Mumbai-based Vedanta Resources Plc’s Konkola Copper Mines also have operations in the southern African country. Barrick Gold Corp., based in Toronto, owns the Lumwana copper mine.

Mine Closed

Glencore, the world’s third-biggest miner by market value, yesterday halted operations at its Zambian zinc mine because of withheld valued-added tax refunds owed to the company. The Zambia Revenue Authority has held back on paying mostly mining companies more than $600 million VAT refunds, because it says exporters haven’t complied with a rule requiring import documents from the countries the products end up in.

Earlier this week, Glencore’s Zambian copper unit suspended part of an $800 million plan to boost production of the metal by 50 percent because it is owed more than $200 million in refunds.

Zambia produces more copper than any other African country after neighboring Democratic Republic of Congo.

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