Gumbo told the Chamber of Mines annual general meeting held last week that the MMCZ charges a 0,975% commission on all exports, which increases costs for mining companies.
However, mining companies also have to set up offshore marketing entities which are subject to a withholding tax, which further increases the costs for the miners.
Gumbo said the tax law should be formulated in such a manner that it would remain relevant in the foreseeable future as the high taxes will not be practical when mineral prices decrease.
It was generally agreed at the conferencethat the mining fees and charges which were hiked in 2011 and 2012 had a very negative economic impact, further fuelling production costs.
According to the Chamber of Mines president, Winston Chitando, the fees and charges were pegged at levels where mines were forced to release ground, even in instances where the ground was in the mining plan, because holding onto it would be too expensive.
The fees placed many holders of mining title in a lose-lose position. Chitando said the chamber would continue engaging the Ministry of Mines and Minerals Development with a view to getting the fees revised.
However, early this week, Mines and Minerals Development minister Obert Mpofu said that government would not reverse the new mining fees gazetted in January.
He said prior to the new regime Zimbabwe had one of the lowest taxes and royalties system. As such, the increase should not be seen at the level of percentage increases but from the low base that the taxes were coming from.
However, Gumbo felt taxes needed to be stratified over a longer period.
“If corporate tax can be stratified over four quarters in one year, then perhaps the government can do the same over 5 years or more for those entities with longer cycles,”he said.
In the current tax regime, companies pay 10%, 25%, 30% and 35% of their forecasted profit margin quarterly. This, Gumbo said could be done to the mining sector.
“Assuming the company forecasts making a million (dollars) in taxable income over the next five years, then it can pay 10% of the tax payable as forecast in the first year and other percentiles in the coming years,” Gumbo said. He noted that just like quarterly payment dates (QPD’s), the total tax paid would still be 100% of what would have been paid anyway. “The main reason here is to accommodate the fact that initial stages of a mine’s life cycle would be capital-heavy and low on profit.”
He said government needed to understand the unique environment and customise tax regimes for this particular industry.
A regional comparison of the fees and charges show that the new fees are way out of kilter.
“The competitiveness of the mining environment has been dealt a severe blow by these new fees,” Gumbo said.
In terms of royalties, Zimbabwe charges a 15% charge on diamonds and 10% on platinum. This is the highest among regional countries, excluding South Africa. Angola charges 5% on diamonds and 5% on platinum. Botswana charges 10% on diamonds and 10% on platinum. Zimbabwe charges 7% royalties on gold but this is lower than the 10% charged in Botswana and Mozambique.
— Staff Writer.