Maravi

Govt won’t reduce mine tax, says Magande

Govt won’t reduce mine tax, says Magande
Written by Kabanda Chulu and Chiwoyu Sinyangwe
Thursday, November 06, 2008 6:55:55 AM

FINANCE minister Ng’andu Magande yesterday said the government has no intentions to revise downwards the mining tax regime despite a decline in global copper prices.
Commenting on the decline in copper prices that currently stand at around US $2.00 per pound and about US $ 4,000 per tonne, Magande said the formula the government used to arrive at introducing windfall taxes was self-adjusting.

“There is no need to renegotiate this issue since the formula we applied is self-adjusting and it will be triggered at different price levels for different base metals and in many instances, the mining companies will not even pay windfall taxes because trigger point will not be reached, for instance, for copper, a windfall tax shall be 25 per cent at the copper price of US $2.5 per pound but below US $ 3 per pound, 50 per cent at price for the next 50 cents increase in price and 75 per cent for price above US $3.5 per pound,” Magande said.

Other changes which the government made to the mining fiscal and regulatory regime that include the introduction of corporate tax rate at 30 per cent, mineral royalty rate at three per cent of the gross value, withholding tax on interest, royalties, management fees and payments to affiliates or subcontractors in the mining sector will be at the rate of 15 per cent and a variable profit tax of up to 15 per cent on taxable income which is above eight per cent of the gross income.

There have been fears that mining companies in the country would not complete their intended projects thereby cutting down on employment due to low copper prices and the imposition of windfall taxes by the Zambian government.

But Magande explained that capital expenditure on new projects is ring-fenced and would only be deductable when the projects start production.

“There is a provision of capital allowance, which is a depreciation of capital equipment, and it has been reduced from 100 per cent to 25 per cent and capital expenditure on new projects is ring-fenced and only becomes deductable when the projects start production,” said Magande.

And some of the mining companies operating in the country have hailed the recent election of President Rupiah Banda calling it “a positive development for mining companies in the country.”

Industrial analysts are believed to view President Banda as potentially good news for mining companies like First Quantum Minerals Limited and Equinox Minerals Limited.

According to the Financial Times, President Banda, unlike late former president Levy Mwanawasa, appears to be opposed to the higher mining taxes that Zambia introduced this year.

President Banda, during the commissioning of the 300,000 tonnes a year capacity copper smelter in Chingola recently, was reported to have said the government would ensure the tax system in the mining companies did not threaten the viability of the country’s lifeblood.

Labels: MAGANDE, MINING, WINDFALL TAX

posted by MrK @ 6:57 AM