August 3, 2010 / 5:10 AM / 8 years ago

Congo to review copper, cobalt taxes: PM

KINSHASA (Reuters) - Congo is to reconsider taxes levied on exports of semi-processed copper and cobalt after appeals from the country’s business community, which says illegal taxes are crippling sectors across the board.

Dominique Strauss-Kahn (L), managing director of the International Monetary Fund (IMF), and Democratic Republic of Congo's Prime Minister Adolphe Muzito pose for a photograph before their meeting in Kinshasa May 24, 2009. REUTERS/Eugene Salazar/IMF/Handout

Prime Minister Adolphe Muzito addressed more than 100 business leaders at a special meeting during which the country’s business federation FEC complained of “unjustifiable poverty” and “persistent problems” throughout the resource-rich country.

“We are going to reconsider our position,” Muzito told the room, packed with business leaders and journalists on Monday, but said he could not make a decision on the spot.

Mining ventures owned by Freeport McMoRan, First Quantum, ENRC and several others have been paying millions of dollars to cover the new $60 per tonne tax, introduced in April on unfinished copper and cobalt to encourage miners to add value to Congo’s resources in-country and export finished products.

Mining companies complained that many in the market require semi-finished products rather than finished products, and that attempts to invest in Congo’s value chain were hampered by a two-year mining contracts review as well as the world economic crisis.

Grievances at the meeting ranged from concerns over banking constraints and legal insecurity to gripes over cigarette smuggling and aviation safety. The crowd regularly applauded complaints aired before a clutch of government ministers.

A memorandum from FEC president Albert Yuma to the prime minister, dated July 23 and seen by Reuters, cited “exorbitant” taxes on everything from air tickets to containers.

It said 84 percent of an air ticket from Kinshasa to nearby Brazzaville, the other Congo’s capital, was spent on taxes, leaving just $29 of a $178 ticket price as company revenue.

“GANGRENOUS” SUPREME COURT

The memo from Yuma also noted that legal decisions were “characterised by corruption and making unfair judgements” and that the Supreme Court was “gangrenous.”

“Legal insecurity is the obstacle the most cited by investors in our country,” Yuma said. “Our justice is sick and condemns the country to lose investors.”

Disputes with First Quantum and Freeport McMoRan have yet to be resolved, and Congo faces international arbitration over First Quantum’s $700 million copper tailings project, which was halted last year citing contractual problems.

Congo is ranked 182 of 183 countries in the world according to its ease of doing business by the World Bank. Congo’s President Joseph Kabila has said he wants reforms to the business climate to see the country leap 20 places this year.

Risk insurers say investment premiums have risen 40 percent in the past year and that Congo is losing at least $100 million a year in investment as a result of its poor business climate.

Prime Minister Muzito referred a number of complaints for review and said the government had to accept it had made errors. Yuma said the meeting was proof that “our young democracy is functioning.”

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