HomeBusiness Digest...firms face extra taxes

…firms face extra taxes

Speaking at a Chamber of Mines seminar in Harare last week, Gumbo said mines have three extra taxes. These being additional profits tax, royalties and marketing commissions but are however exempt from paying the Aids Levy.

At the beginning of the year, government raised mining fees by 5 000%. According to Statutory Instrument 11 of 2012, published on January 27 2012, registration of diamond claims increased from US$1 million to US$5 million with a new ground rental fee of US$3,000 per hectare per year.

Application fee for prospective coal investors has been increased from US$5 000 to US$100 000, while the registration or renewal fee is set at US$500 000.

Mines minister Obert Mpofu said the new fees structure is to discourage holding of exploration and mining ground for speculative purposes as well as enable release of ground for exploration and development by serious players.

However the major reason behind the increase in the taxes is that the government had set a US$2,4 billion contribution target and Mpofu said the question facing the ministry is how to achieve this. The intention of the new fees is to increase capacity utilisation.

In Zimbabwe royalties are between 1-15%. Diamond and platinum attracts the highest charge at 15%, precious stones at 10%, gold at 7%, base metals and industrial metals each at 2% while coal stands at 1%.  The range puts Zimbabwe on top of the list of countries charging the highest royalty rate, particularly with regards to gold, platinum and diamonds.

Gumbo said the royalty regime has an effect of skimming off the top-line rather than profits. It should be read in the light of quality of resources.

“The level of royalty payments implies that miners are not fully unlocking the potential of beneficiation locally as royalties are rebated to the extent of local beneficiation or where the minerals are sold locally,” said Gumbo.

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