Polish Treasury calls lower tax

WARSAW: Poland's new mining tax, which will mainly fall on Europe's No.2 copper producer KGHM , is out of sync with global standards and should be reviewed to reflect production costs, the treasury ministry said.

Shares in the state-controlled KGHM jumped by as much as 5.5 percent and led Warsaw's bluechip gainers on Monday.

The finance ministry in December published a proposed mining tax bill, which is to be discussed by the Polish government this month. The levy is to raise 1.8 billion zlotys ($524.2 million) in 2012 and subsequently rise to 2.2 billion.

"tax' proposed level is out of sync with global standards," Treasury Minister Mikolaj Budzanowski wrote in his comments sent to the finance ministry. "The proposed tax levels should reflect not only metal prices but also mining costs.

"The taxes in operation in other countries equal a few percent or in the teens percentage wise, while in the case of KGHM the levy (on the 2010 basis) would stand at 33 percent of its operating income."

According to finance ministry's proposals, the tax would be charged at a minimum of 130 zlotys per tonne of copper extracted when the metal's price is below 13,000 zlotys, stepping up to a maximum 32,000 zlotys per tonne if the price exceeds 52,000 zlotys.

In December, Finance Minister Jacek Rostowski said Warsaw would not alter its plans to introduce the tax, which stood behind last year's 36-percent fall for the state-controlled KGHM, which is also the world's second-largest silver miner.

Analysts fear the new tax would not only curb profit at the miner, which struggles with high production costs, but could also derail its share buyback and dividend plans.

The levy, criticised also by Poland's economy minister Waldemar Pawlak as well as KGHM unions, was to be implemented on March 1, but the government's legislation centre questioned the date in the face of ongoing consultations.

Copyright Reuters, 2011