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Zambia's new government to consult mining firms before changing tax regime

Highlights

Zambia's new Patriotic Front Government said Sunday that it wouldconsult mining companies before a new tax regime was introduced and not makearbitrary changes.

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The country's newly elected president, Michael Sata, will not frame ajungle law to make changes to the tax regime but will consult the miningcompanies, an official, Lameck Mangani, said, adding: "We cannot destroycompanies that are giving the country money."

He said the Patriotic Front had statistics and these would be tabledbefore the mining companies.

Meanwhile, the largest labor union in the Zambian mining industryendorsed the reintroduction of a windfall tax by the new government becauseit said Zambia was not benefiting from increased prices of copper.

The Mineworkers Union of Zambia, with membership of more than 15,000,said that Zambia was losing a lot money through unpaid windfall tax by mining companies.

MUZ president Boniface Mukuka said the suggestion by the new governmentto reintroduce the windfall tax for the mining companies was a welcome moveand should be supported by all Zambians.

He said the new minister of mines and minerals development should alsotake a fresh look at the employment of casual labor in the mining sector.

He said the employment of labor on casual terms was not appropriate asworkers were fired at will and without benefits.

The new government under the Patriotic Front, which took over reigns ofpower on September 23 after winning a landslide victory in the September 20general elections, vowed in its campaign that it would look at mining taxesto ensure the taxes were proportional to the profits made by mining companies.

As of now, mining companies in Zambia pay a 3% mineral royalty tax, 30% corporate tax and 15% variable tax.

One of the priorities of a PF government was to review taxes in themining sector, Robert Sichinga, a member of the PF and a business consultant,said on a television program on September 24.

He said it was imperative that the new government reintroduced windfalltax so that all Zambians could benefit from the mining sector.

He said government would ensure that investors did not externalize allthe profits they made in the sector but use the money for development inZambia.

In his inaugural speech on September 23, President Michael Sata said foreign investment was important to Zambia, as it did not only create jobsbut equally contributed to the economic empowerment of Zambians.

"We will continue to work in fair partnership with the investors alreadyin the country and welcome new ones," he said.

"It is our hope that investors will abide by the labor laws of thecountry ensuring that Zambians are not disadvantaged," he said.

--James Mwambazi, newsdesk@platts.com