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Zambia cancels contentious sales tax plan opposed by mining companies

Zambia dropped its plan to impose a new nonrefundable sales tax that miners in the country have opposed, Reuters reported Sept. 27, citing Finance Minister Bwalya Ng’andu.

The debt-ridden country previously delayed the planned implementation of the 9% across-the-board tax to January 2020 from September 2019 to look into concerns over the new levy that would have replaced the existing value-added tax.

Miners such as First Quantum Minerals Ltd., Glencore PLC and Vedanta Ltd., which is in a legal battle with Zambia, criticized the plan over rising operating costs. In August, an S&P Global Ratings report noted that the new duties and issues with Vedanta could drive away mining investment in the country.

The government will maintain the existing VAT but address compliance and administrative challenges, Reuters quoted Ng'andu as saying.

Zambia's Chamber of Mines CEO Sokwani Chilembo welcomed Zambia's decision, but flagged other measures in the country's budget, such as cutting the capital allowance for capital expenditure to 20% from 25% and limiting VAT claims on electricity to 80% from 100%.

"These new measures will make rehabilitation and maintenance more expensive at a time when we are already struggling to keep our plants in good shape," Chilembo told Reuters.