GOVERNMENT is considering increasing mining tax by at least two percent two ensure a bigger chunk of the forex that is generated by the sector, the largest contributor to foreign currency inflows, goes to the national fiscus, a minister said Thursday.
Addressing a Mining and Agriculture Interface breakfast meeting at the Harare Agricultural Show, Mines Minister, Walter Chidhakwa, said the sector’s export earnings, which stood at between 64 and 65 percent of the country’s total, were not reflected in the sector’s contribution to the national fiscus.
He said while the sector was contributing 60 percent of the total export earnings since 2009, its weakest point was the seven to 10 percent contribution to the national budget, noting it needed to be making a bigger contribution.
This, he said, was beneficial not only to the government and other sectors of industry, but also to the mining sector as it would enable the state to develop infrastructure such as electricity, roads, railways and telecoms.
“There is a fine line between lower taxation to be attractive for investment; but too low affects infrastructure development and therefore there is need to increase contribution to the fiscus; perhaps move to between 10 and 15 percent, which will be significant. A two percent increase will be significant,” he said.
Chidhakwa said miners, especially those into chrome, required a lot of electricity for beneficiation of their products and that power needed to be provided by the state.
“Chrome companies have negotiated for a price of 6.2 cents per kilowatt hour but if we could get that electricity for 3 cents per kilowatt hour, a lot of smelters would move to Zimbabwe because competitive power costs would be an advantage as getting the right price and reliability of power will increase productivity.
“Therefore, the issue of providing resources to the state to develop power that is reliable is important for companies; so in appearing to be speaking for the Minister of Finance to get more taxes, I am actually speaking for the miners because they will eventually reduce production costs,” he said.
However, Zimbabwe Miners Federation President, Apolonia Munzverengwi said while the idea was a noble one, there was need for the government to consider production levels when dealing with the taxation issue.Advertisement
“Our federation has two sectors, the small scale miners and the large mining companies; while the tax arrangement for the big companies is well organized, we are still in the process of coming up with the data base for the small and medium scale miners.
“We are mobilizing money for a national audit so we can first educate them on how they can take mining as a business and taxation will be one of the issues we will be discussing, but we want the government to consider to consider production levels,” she said.
Micah Munetsi of the Zimbabwe Rural Miners Association said the current licensing and tax regime was already hurting them and any further increases would negatively impact on their operations.
“We have been arguing about the prospecting license fees which are currently pegged at $350, they need to get them to $50 so that we become viable. So the talk of another tax increase when we are already struggling will surely hurt us even further,” he said.