Zambia minister says payment of mining royalties can be deferred

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By Ed Stoddard

CAPE TOWN, Feb 10 (Reuters) - Zambia's commerce minister said on Tuesday that payment of mining royalties, which Zambia recently increased, can be deferred until companies have sufficient cash flow if they are not in a position to pay immediately.

Zambia's government said last year that it would scrap a corporate income tax of 30 percent while increasing mining royalties for companies operating in Africa's second-largest producer of copper.

Since the tax came into effect this year, however, Zambia's new president Edgar Lungu has signaled that the country might revise the increase in the face of industry complaints.

"If your company is unable to pay the tax for any reason, we are ready, willing and able to defer your liability. We won't put away the liability, but we are happy to defer until a point in the future when your cash flows allow you to pay your tax," Margaret Mwanakatwe told delegates at a mining conference.

The minister defended the new system, saying that only two companies - which she declined to name - had paid the corporate tax in recent years and that Zambia and its people needed to benefit from its resource wealth.

"Only two companies paid corporate tax, the rest paid nothing. Those that paid the corporate tax are now paying a reduced tax. Those that were not paying at all are now paying something. We are bringing about a level playing field."

Zambia's Chamber of Mines said in December the new royalties would result in shaft closures and 12,000 jobs losses.

Mopani Copper Mines, owned by Glencore (Xetra: A1JAGV - news) , and Canada's First Quantum Minerals (Toronto: FM.TO - news) both have big copper projects that could also be at risk, the Chamber of Mines said.

The minister also said that progress was being made in a simmering row over tax refunds.

Zambia has been withholding the VAT payments from mining companies and other exporters it says have not produced import certificates from destination countries - a step the government says is needed for greater transparency.

The industry says that it is almost impossible to produce such documentation because it sells to multi-national trading houses, and has for months been saying it is owed $600 million.

Mwanakatwe told Reuters on the sidelines of the conference that in fact $800 million had been withheld but $200 million has been given to companies which have produced the documentation. (Editing by James Macharia)