Export levy on minerals set for Q1

The disputed export levy on unprocessed mineral resources will soon become a reality, the Economist has established.
Finance Minister Saara Kuugongelwa – Amadhila said on Wednesday that she was confident that by the end of the first quarter of this year, her Ministry will approach Parliament with proposals of the different levies that will be charged on the resources affected despite resistance from the Chamber of Mines.
She said: “On the export levy, we are trying to determine what the rate of the levy will be on the resources affected. It’s a very involved process and it is ongoing but we are confident that by the end of the first quarter of 2012 we will approach Parliament with proposals.
“The chamber is objecting to the 0 to 2% range that we have proposed but we think it is fair and balanced. So we will proceed to determine the rates for the different products despite their objections.”
In August last year, government was forced to defer the introduction of a raft of mining taxes following spirited resistance from the Chamber of Mines who argued that any new taxes will “kill the goose that lay the golden egg.”
As part of the proposed amendments to the tax legislation, government announced last July that mines will have to pay VAT of 15% on the export value of unprocessed minerals. It also proposed a 5% levy on the export of raw materials, as well as an increase in the corporate income tax rate for non-diamond mining activities to 44%, from the current 37.5%, among other changes.
But as soon as the changes were announced, government backtracked on its decision announcing that the zero-rating of VAT on the export of raw material would remain in place, while the 37.5% corporate tax rate would be maintained in conjunction with a formula-based surcharge to capture additional mining revenue during better economic periods. The plan to introduce a levy system would also remain in place, but not at a 5% rate.
However, Kuugongelwa – Amadhila said this week that the Chamber was just making an argument. “I think they will have an opportunity to express themselves on the specific rates for the individual products. It will be unfair for anyone to say that they shouldn’t be a levy at all and we allow everything to go out in raw form without any levies.”
The Minister said her ministry had taken note of the mining industry’s offer to advance some proposals on the possibilities to add value to the natural resources.
“On this issue other Ministries are responsible as this is not a financial matter per se but the Ministry of Finance is interested in that issue and we would like to participate in the dialogue between government and the private sector,” she said.
In her budget speech to Parliament on Tuesday, Kuugongelwa – Amadhila announced that new taxes will be introduced during 2012/13 fiscal year. She said the introduction of the new taxes is premised on three broad objectives, namely: deepening and diversifying the revenue base in an environment of increased trade liberalisation and taking into consideration the ability to pay; promotion of domestic value-addition to raw materials and industrialisation, particularly in the natural resources sectors, and wealth distribution and social welfare promotion
She said a number of tax proposals will be introduced during the course of 2012 and these include: a differentiated rate on the export of natural resources; a revised Corporate Income Tax for non-diamond mining companies; an environmental levy on a range of environmentally harmful products, and a transfer duty on the sale of shares in companies owning fixed property and mineral rights or licences.
The Minister said these measures are all part of a broader tax policy and administration reform agenda, which will be pursued over the medium term to improve the tax system.