Zambia pricing itself out of global mining with tax hikes -industry body

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LUSAKA, Dec (Shanghai: 600875.SS - news) 20 (Reuters) - Zambia is pricing itself out of the global mining market with proposed tax increases, the head of the local mining body said on Thursday, a further warning to investors rattled by the government's efforts to squeeze more money from the sector.

Africa's No.2 copper producer plans to introduce new mining duties, replace value-added tax (VAT) with a sales tax and increase royalties, from January, to help bring down mounting public debt.

Mining accounts for more than 70 percent of Zambia's foreign exchange earnings and companies operating in the southern African nation include First Quantum, Glencore (Amsterdam: GX8.AS - news) and Vedanta Resources (Other OTC: VDNRF - news) .

"The proposed regime will result in over 58 percent of Zambia's copper producers being in a loss-making position at current prices," Zambia Chamber of Mines' President Goodwell Mateyo told a news conference.

The government estimates that mining tax revenues will rise to $1.3 billion next year following the tax increases, from $800 million this year. The chamber, however, expects revenues would rise to only around $840 million, Mateyo said.

The government still owes mining firms around $550 million-$600 million in VAT refunds, which the revenue authority has promised to pay by next year, Chamber Chief Executive Sokwani Chilembo said.

Concerns about Zambia's rising debt, alongside accusations of additional hidden borrowing and government corruption, have spooked investors and Western donors in recent months.

The International Monetary Fund has put on hold talk about an aid package due to Zambia's debts, which it describes as unsustainable.

(Reporting by Chris Mfula; Editing by Alexander Winning and Susan Fenton)