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By Geoffrey Kapembwa

March 28 (Bloomberg) — Zambia, Africa’s biggest copper producer, rejected proposals by mining companies for changes to planned tax increases, which become effective on April 1.

Finance Minister Ngandu Magande in January proposed a range of measures, including windfall and variable-profit taxes, which raise the effective tax rate on mining companies to 47 percent, from 31 percent. Requests for changes to the legislation were unacceptable to lawmakers, Magande said in an interview today in the capital, Lusaka.

“The law has changed and the mining companies will now be obliged to pay all the proposed taxes,” Magande said.

Copper accounts for about 70 percent of Zambia’s export income. Production has risen in recent years as the price of the metal has more than doubled since March 2005. Companies including First Quantum Minerals Ltd., Vedanta Resources Plc and Glencore International AG operate in the southern African nation.

Magande announced in his annual budget on Jan. 25 that miners will be charged a windfall tax on sales of copper when the price rises above $2.50 a pound ($5,512 a metric ton). A charge of 25 percent will apply to the amount above $2.50 to a maximum of $3.00 per pound, while the rate increases to 50 percent at between $3.00 and $3.50 and 75 percent above $3.50.

Copper futures for May delivery rose $15, or 0.2 percent, to $8,520 a metric ton in London at 12:15 p.m. local time today. The metal has climbed 28 percent so far this year.

`Unilateral Action’

Zambia intends to implement a tax on profits of up to 15 percent when companies earn a return in excess of 8 percent on their investments. In addition, royalties on sales will be increased to 3 percent and corporate income tax will rise to 30 percent from 25 percent.

Mining companies with operations in Zambia had requested that they not have to pay both the windfall and variable-rate taxes and asked the government to consider charging only one of the two, the Times of Zambia reported on March 3.

“None of the proposed changes was accepted by legislators,” Magande said.

Mining companies operating in Zambia posted sales of $4.7 billion in the year that ended March 31, 2006, and only paid $142 million in taxes.

Zambia’s Chamber of Mines is not willing to continue fighting the government over the new law, although it warned that consequences from the “unilateral action” may damage future investment prospects.

“We’ll comply with the new law,” Fred Bantubonse, general manager of the chamber, said in a telephone interview from Kalulushi in northern Zambia today.

Zambia produced an estimated 523,435 tons of copper last year, compared with 515,618 tons in the same period a year earlier. Cobalt output fell to 4,229 tons, from 4,648 tons over the same period.

To contact the reporter on this story: Geoffrey Kapembwa in Lusaka via Johannesburg at pmrichardson@bloomberg.net.

Last Updated: March 28, 2008 08:15 EDT

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