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By Jeff Kapembwa

Jan. 27 (Bloomberg) — Zambia may cut taxes on mining companies in its annual budget this week as the global financial crisis saps demand for copper, the country’s main export, the Chamber of Mines said.

Talks between the government and industry about reconciling a higher tax regime with lower metals prices have started, said Nathan Chishimba, president of the Chamber of Mines of Zambia, by phone today from the capital, Lusaka.

Zambia, Africa’s largest copper producer, introduced higher taxes last year to take advantage of soaring metals prices. Demand for copper, used in plumbing and electrical wiring, has since crumbled as the collapse of the U.S. housing market led to a drop in orders from builders.

More than 3,000 jobs have been lost across the Zambian mining industry as companies close operations, Mines Minister Maxwell Mwale said last week.

Miners want Zambia to scrap a windfall tax and other variable rates, and to reduce corporation tax to allow them to maintain operations while reducing costs.

Copper accounts for about 70 percent of Zambia’s export income. Companies including First Quantum Minerals Ltd., Vedanta Resources Plc and Glencore International AG operate in the country.

Revenue from mining royalties soared almost fourfold in the first six weeks after the new tax structure came into operation on April 1, the Zambia Revenue Authority said May 21.

The country’s 2009 budget will be presented to parliament by Finance Minister Situmbeko Musokotwane on Jan. 30.

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

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