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Abu Dhabi, UAETuesday 19 June 2018

Zambian leader pushes for miner's $7.9bn tax bill to be settled quickly

First Quantum Minerals, a copper producer, received the demand this week, which is bigger than the country’s 2018 budget

First Quantum Minerals chiefPhilip Pascall at the firm's annual general meeting for shareholders in Toronto, Canada.The company refutesan almost $8bn bill Zambia says it owes. Mark Blinch/Reuters
First Quantum Minerals chiefPhilip Pascall at the firm's annual general meeting for shareholders in Toronto, Canada.The company refutesan almost $8bn bill Zambia says it owes. Mark Blinch/Reuters

Zambian President Edgar Lungu wants his tax authority and First Quantum Minerals to speedily resolve a disputed tax bill the copper producer received this week, which at $7.9 billion is bigger than the country’s 2018 budget.

“It’s a policy of government not to interfere with independent assessments made by the tax authority,” Amos Chanda, Lungu’s spokesman, said late Wednesday. “All we do is to encourage quick negotiation of the parties to get to an agreement quickly so that there are no anxieties on both sides.”

Shares in First Quantum, which derives 84 per cent of its revenue from Zambia and accounts for more than half of the country’s copper production, fell 12 per cent in Toronto on Tuesday after it announced the tax authority had demanded the payment. The company “completely refutes” the assessment, which includes $5.7bn of interest, chief executive Philip Pascall said on Wednesday.

It’s important that the development has been made public, government spokeswoman Dora Siliya said on Thursday.

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“It means that the Zambia Revenue Authority is not sleeping,” she said. “Yes, we wish that it hadn’t taken this long, over time because this company is being accused that it has been hiding tax declarations for over five years.”

The stock regained some ground on Wednesday, closing 3.7 per cent higher at C$18.65.

First Quantum isn’t the first miner to be hit with a huge tax bill for operations in Africa. Last summer, Tanzania sent Acacia Mining a demand for payment equal to almost two centuries’ worth of the gold miner’s revenue. And the Democratic Republic of Congo is moving ahead with a new mining code that may dramatically raise tax payments. The Zambian government in 2015 reversed a move to increase mine royalties to as much as 20 per cent after Barrick Gold said it would close its mine there.

The Zambia Revenue Authority is autonomous and the government would only intervene in the dispute as “a matter of the last resort and if circumstances demand that an intervention is made”, Mr Chanda said. “We are very confident in the professionalism in Zambia Revenue Authority that it will deal with investors within the agreed parameters of tax administration.”