Zambia abolishes 25 pct windfall mining tax

Fri Jan 30, 2009 3:36pm GMT
 

By Shapi Shacinda

LUSAKA (Reuters) - Zambia, Africa's top copper producer, said on Friday it would abolish a controversial 25 percent windfall tax to cushion its key copper mining industry from weak prices stemming from the global financial crisis.

Zambia's Finance Minister Situmbeko Musokotwane said in his budget speech the southern African nation's economic growth would fall to 5.0 percent in 2009 from an estimated 5.8 percent expansion last year, due to the global crisis.

Annual inflation was seen braking to 10 percent in December 2009 compared with 16.6 percent last year, he said.

Musokotwane said in a speech to parliament the government would abolish the tax to safeguard the country's economic lifeblood at a time when commodity prices had fallen.

Musokotwane said the government reduced the windfall tax after consultations with foreign mining firms, which have complained of higher taxes, high electricity tariffs and fuel prices and falling global metals prices.

Zambia depends on copper and cobalt for more than 63 percent of government revenues. Less copper demand would translate into reduced foreign exchange earnings.

"In light of the impact of the global crisis on the mining sector, I propose the following refinements, to remove the windfall tax and retain the (15 percent) variable tax, which will still capture any windfall gains that may arise in the sector," Musokotwane said.

Musokotwane said the government would cut duty for heavy fuel oils from 30 percent to 15 percent and to remove customs duty on copper powder, copper flakes and copper blisters.   Continued...

<p>A copper mine in Chililabombwe, 500km (300miles) north of the Zambian capital Lusaka in a file photo. REUTERS/SALIM HENRY</p>
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