Picture: Reuters.

Lusaka - Zambia's mining industry said on Wednesday an increase in corporate tax to 35 percent and other new tax rules will scare away investors and discourage processing to add value, and called for them to be scrapped.

Last month Zambia, Africa's number two copper producer, approved a plan to increase the corporate income tax rate on mineral processing to 35 percent from 30 percent, and it became effective this month, bringing it in line with the rate charged to non-mining companies.

Foreign mining companies in Zambia include Glencore, Barrick Gold Corp, Vedanta Resources and First Quantum Minerals.

The government also cut mineral royalty rates to 6 percent for underground mining, from 8 percent, and to 9 percent for open cast mining, from 20 percent.

However, Zambia's Chamber of Mines, an industry body representing mining companies, said in a presentation to parliament the new tax rules would hurt investor confidence.

“It's therefore proposed that corporate tax on income should be maintained at 30 percent,” it said.

The chamber also said the provision for different royalties based on mining methods did not take into account the peculiar challenges that both open cast and underground operations faced.

“It is recommended that the mineral royalty should be the same across the entire industry at 6 percent,” it said.

The chamber also said proposed amendments to the Mines and Minerals Development Act gave the government too much power, with wide paremeters to introduce new regulations for mining firms.

“The above provisions clearly indicate that the legislative framework within the mining sector will not be predictable and can easily be amended,” the chamber said.

Mining accounts for 12 percent of gross domestic product (GDP) and 10 percent of formal employment in Zambia.

Reuters