Zambia won’t refund controversial mine tax payments

Zambia will not refund foreign mining companies millions of dollars they paid in taxes when a new controversial law was in force, but could revise existing taxes, the attorney-general said on Wednesday.

According to Reuters news agency, Mumba Malila said the development agreements, which gave the mine owners the right to compensation if the government failed to comply with agreed tax stability guarantees, were no longer binding, after Zambia amended its mining law in 2007.

Canada’s First Quantum Minerals (FM.TO) said this week it had paid Zambia $140 million in higher taxes by the end of June this year, and wanted to seek a refund from the government.

Malila said although the government was willing to discuss the current taxes with mining companies, there was no guarantee that Zambia would pay back the $140 million to First Quantum.

“The development agreements were rendered null and void by the amendment of the law and any benefits that were accruing to the mines ceased after enactment of the new Mines and Minerals Development Act,” Malila told Reuters.

“They want to discuss the taxes with the government but the starting point of such talks cannot be that the development agreements are binding. The Zambian law does not recognise the development agreements anymore,” Malila said.

The demand by First Quantum is just one of several from western mining companies seeking a reversal of some mining taxes Zambia introduced in 2007, including a 25 percent windfall profit tax, which it quashed last year, following sustained pressure from the foreign mine owners to scrap the taxes.

Zambia also introduced other taxes to cash in on the boom in commodity prices in 2008. This created a controversy with mining companies, which said the government had gone against contracts it had signed with them promising lower taxes.

First Quantum, which operates the Kansanshi mine, Bwana Mkubwa mine and holds a minority stake in Mopani Copper Mines in Zambia, threatened to sue the government, but backed down after authorities promised to address its concerns.

Other firms operating in Zambia’s mining sector include London-listed Vedanta Resources Plc (VED.L), Equinox Minerals Ltd (EQN.TO)(EQN.AX) and Glencore International AG [GLEN.L]. (Editing by James Macharia and James Jukwey
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