re new mining tax

LUSAKA � Zambia said on Monday it will not reintroduce the controversial mining windfall tax it scrapped in 2009 when copper prices rose sharply, despite pressure from opposition parties to do so.

The introduction of a 25% windfall tax and other taxes in 2008 was backed by the World Bank to help Zambia raise funds required to build schools, roads and provide health and education services in the poor southern African country.

Mines Minister Maxwell Mwale said although countries like Australia had introduced a tax similar to windfall tax, Zambia would not do so, and he hoped investors leaving Australia would explore mining opportunities in Africa's top copper producer.

"Those calling for the reintroduction of windfall tax do not know what it takes to run a government," Mwale said after meeting officials of First Quantum Minerals.

"In 2008 when we imposed windfall tax we saw a decline in mineral exploration and we don't want that to happen, we need to attract investors."

Australia angered the booming resources sector, including BHP Billiton and Rio Tinto, by unveiling a new tax on mines from July 2012 under a sweeping pre-election tax overhaul which will also boost pension savings for workers.

First Quantum resident director, Kwalela Lamaswala said the windfall tax raised production costs for mining companies and that scared away investors.

"The windfall tax was a very retrogressive tax and we are very happy the government has realised this," Lamaswala said.

Zambia's main opposition leader Michael Sata said the country was forfeiting revenue after the tax was scrapped.

"The MMD government should listen to the cry of the people of Zambia and reintroduce the tax for the benefit of the country. We need the revenue to improve the lives of the Zambian people," Sata told Reuters.

In 2008, Zambia introduced a 15% profit variable tax, 25% mineral windfall tax and raised corporate tax to 30 percent from 25% and mineral royalty to 3% from 0,6%, upsetting foreign mining firms.

Copper mining is Zambia's economic mainstay and the mines are a major employer for many of its 12-million people.

Foreign mining companies operating in Zambia include London-listed Vedanta Resources, Equinox Minerals and Glencore International of Switzerland.
Edited by: Reuters