Bloomberg News

Poland Relaxes Copper Tax Proposal, Sticks to Revenue Target

January 02, 2012

(Updates with Finance Ministry comment in fifth paragraph.)

Jan. 2 (Bloomberg) -- KGHM Polska Miedz SA, Poland’s sole copper and silver producer, may pay a lower tax than expected after the Finance Ministry relaxed its plan for a new levy it plans to impose this year for extracting the metals.

“The new proposal is more favorable for the company,” Tomasz Krukowski, an analyst at Deutsche Bank AG in Warsaw, said by phone today. KGHM will pay about 450 million zloty ($130 million), or 20 percent, less in tax using the formula published today on a government website than it would using the one announced last month, according to Krukowski.

KGHM shares lost 34 percent through Dec. 30 after Prime Minister Donald Tusk announced the plan in his policy speech on Nov. 18. The benchmark WIG20 Index fell 6.5 percent in the same period. Poland, which holds a 32 percent stake in KGHM, plans to raise 1.8 billion zloty ($521 million) from the tax this year to raise revenue for cutting the budget deficit.

In an updated draft bill that took into account comments from the company and other ministers, the Finance Ministry set the maximum tax level at 20,000 zloty a ton, compared with 32,000 zloty a ton in the previous proposal.

While changing the formula, the ministry kept its target of raising 1.8 billion zloty from the tax next year after it raised its forecasts for the copper price, spokesman Wieslawa Drozdz said in an e-mailed reply to questions from Bloomberg today. The ministry, which plans to introduce the tax on March 1, estimates that copper will trade at an average of 25,500 zloty a ton in 2012. It didn’t give the previous forecast.

‘Disproportionate’ Formula

The zloty has weakened 4.4 percent against the dollar since Tusk’s policy speech.

The Treasury Ministry, which supervises the company, proposed lowering the old tax formula by calling it “disproportionate” in comparison with global standards, it said in a statement published on a government website earlier today.

KGHM earlier said that the old formula bears “substantial” risk of it “generating negative results” if prices of the metal decline. Company spokesman Dariusz Wyborski had no immediate comment when contacted by Bloomberg by phone about the new formula.

“The impact of the new formula is definitely positive,” Leszek Iwaszko, an analyst at Societe Generale SA, said by phone today. “What’s strange is that it’s relatively easier on the company when the price of the metal is high, while there’s no such material difference with the old formula at lower copper levels. The logic should be the other way round.”

Copper closed at $7,600 a ton on Dec. 30 and the zloty was at 3.4610 against the dollar at 2:55 p.m. today.

KGHM expanded gains, rising as much as 7.6 percent to 119 zloty at 5:09 p.m. in Warsaw, or most since Oct. 27.

--Editors: James M. Gomez, Alan Crosby

To contact the editor responsible for this story: Maciej Martewicz at

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