President Lungu hopes for swift resolution to ZRA-FQM mining tax standoff

President Edgar Lungu wants the Zambia Revenue Authority (ZRA) and First Quantum Minerals Ltd. to speedily resolve a disputed tax bill the copper producer received last week, which at USD$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, President Lungu’s spokesman, said. “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% of its revenue from Zambia and accounts for more than half of the country’s copper production, fell 12% in Toronto, Canada on Tuesday after it announced the tax authority had demanded the payment. 

The company “completely refutes” the assessment, which includes USD$5.7 billion of interest, Chief Executive Officer Philip Pascall said on a call with investors.

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

“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% higher.

First Quantum isn’t the first mining firm to be hit with a massive tax bill for operations in Africa. Last year, Tanzania sent Acacia Mining Plc 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% after Barrick Gold Corp. said it would close its mine.

The ZRA 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,” 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.”