Zambian President Levy Mwanawasa will personally negotiate proposed tax increases in mineral royalty and corporate taxes with foreign copper mining firms. Mwanawasa said he would meet chief executive officers of key foreign copper and cobalt mining firms to discuss the proposed hike of the mineral royalty to 3% from 0,6% and corporate tax to 30% from 25%.
The Zambia News and Information Services (ZANIS) said Mwanawasa had invited the mine managers to his official residence to discuss the tax increments, but did not indicate when this meeting would take place. "Mr. Mwanawasa said so far, the mining firms had in principle agreed with the government's intention to increase mineral royalties," Zanis said.
The mining firms already pay value added tax, personal income tax for workers and land tax to municipal councils.
Finance Minister Ng'andu Magande in a separate statement said the mining firms had declared an aggregate profit of $397.3 million in 2005/06 financial year, after making losses of $43.2 million in 2002/03. He said the mining companies contributed 35.7 billion kwacha (approximately $9 million) in mineral royalties, up from 3,633,795 Zambian kwacha in 2002/03 financial year.
Analysts attribute the jumps to rising international metals prices and a more than doubling in Zambia's output of copper, the country's main export, over the period.
Magande said the government would audit earnings of the mining firms to determine the tax requirements. "It is important to note that there is a process in place that is diligently observed to ensure that tax audits are conducted to verify the profits declared by mining companies," he said.
Tax increases have been a controversial issue in Zambia since last September's presidential and legislative elections, after chief opposition leader Michael Sata swept to a major victory in parliamentary polls following his pledge to raise taxes paid by the mines. Sata lost the presidential vote to Mwanawasa, who was re-elected for a second and final five-year term in office allowed by the law.
Some of the key foreign investors in Zambia's mining sector include Canada's First Quantum Minerals, Australia's Equinox Minerals, London-listed Vedanta Resources and Swiss firm Glencore International AG.
Copper mining earns Zambia the bulk of foreign exchange, but analysts say the country does not reap enough benefits because the mines are owned by foreigners.