THE Attorney-General’s office is still to finalise the case between the country’s biggest platinum miner Zimplats and the Zimbabwe Revenue Authority in a dispute over US$16,6 million in w
The case was referred to the AG’s office after the South African-owned firm claimed that the government was reneging on an agreement struck with two previous ministers of mines, Sydney Sekeremayi and Edward Chindori-Chininga, on exemption from paying withholding tax.
Zimra is now demanding that Zimplats pays the withholding tax. Zimplats argues it was granted a tax holiday by government.
The dispute has also roped in Vice-President Joseph Msika to whom Zimplats had appealed to for help. Currently the withholding tax is fixed at 20%.
Attorney-General Sobusa Gula-Ndebele could not comment on the issue, referring all enquires to acting director in the civil division, Fatima Maxwell.
Maxwell could not comment on the case saying it was being handled “by the legal advice division”.
No comment could be obtained from the legal advice division head, Lawrence Murasi.
In September, Zimplats chief executive officer, Greg Sebborn, wrote to the Ministry of Mines permanent secretary, Thabani Ndlovu, saying their operations in the country were governed by an international agreement.
Sebborn said a mining agreement signed by the government, Hartley Platinum representatives and Zimplats was meant to attract large-scale investments in the country through tax holidays.
He said specific issues were included in the agreement in order to ensure that investors were not penalised after investing large sums of foreign capital in new assets in Zimbabwe, especially in view of the long-term risks and payback periods.
“Such clauses include an exemption from sales tax on new capital goods, thereby ensuring that capital costs were competitive worldwide, and an exemption from withholding tax on dividends, thereby ensuring that equity funding costs were not inflated to the point where investment became unviable,” he said in the letter.
“The agreement is clear in terms of the obligations of all the parties, and in the agreement, government undertook to give effect to its obligations by way of amending legislation where necessary.”
Regrettably, Sebborn noted, the mooted amendments regarding withholding tax had not been promulgated into law.
In the letter, Sebborn said at a meeting between Zimplats, then acting president Msika and the Minister of Mines, Amos Midzi, “it was once again stated that our agreement should and would be honoured”.
On September 15, Sebborn said, Zimra insisted that Zimplats “pay US$16,6 million immediately for dividend tax (US$3,2 million) and penalties and interest (US$13,4 million) failing which they will take immediate unspecified action to ensure compliance with their demands”.
Meanwhile, Zimplats is going ahead with its US$14 million expansion at Mimosa Mine.
The cash is being raised from Mimosa’s own resources (US$4 million) and a US$10 million loan from the Merchant Bank of Central Africa.