Namdeb wants tax relief
Diamond producer, Namdeb said it is hoping to get some tax relief in the recently announced 2013/2014 budget, CEO Inge Zaamwani-Kamwi told The Economist recently.
Zaamwani-Kamwi said while she was generally satisfied with the “good budget for Namibia”, the mining sector had expected to get tax relief since the sector was one of the highest taxed in the region.
She said: “ We [mining industry] would have wanted some sort of relief, particularly to the diamond mining sector. Like the rest of the mining industry, diamond mining is capital intensive and requires huge upfront investments. Although there are very generous capital allowances in the Tax Act that allows one to write off capital over a three-year period, diamond mines are required to pay a royalty on turnover of 10% and company tax of 55% on its profits, the net effect being an effective tax rate of around 65% that increases as profitability decreases due to the fixed element of the royalty.”
The Namdeb CEO said the high taxes are negatively impacting on operations as it is now increasingly difficult to achieve the required hurdle rates as miners attempt to justify the investment to mine lower grade areas, adding that opportunities could be lost to extend the life of diamond mines into the future due to the high tax rates that are much higher than other mining companies and non-mining companies. She said that any reduction in the diamond mining tax or royalty rates could have a positive impact on extending the life of mine operations.
While the mining industry did not get any tax relief, the sector will soon be expected to pay export levies on raw materials. The Minister of Finance is expected to table the Export Levy bill in Parliament within the next few months. The Namdeb chief said she is worried about the impact that the new export levies would have on the sector.
“We had hoped that the export duty that is being considered would probably not be made applicable, but here we are, we have to see what the additional impact of the levy will be. The diamond industry is a mature industry; our cost structure is already high enough. We are already paying high taxes. Namibian diamond mining taxes are probably the highest in the region, if not in the world, so any other additional costs that you impose just makes it impossible for us to unlock the value in the diamonds that are in the ground. It makes it more expensive to mine,” said Zaamwani-Kamwi.
She said the sector will continue to consult with the government on a project to project basis.
In her budget presentation to Parliament last Tuesday, Finance Minister Saara Kuungongelwa-Amadhila announced proposals for a reduction in non-mining company tax from the current rate of 34% to 32% in the next two financial years. She also increased the income tax threshold to N$50 000 in addition to reduced individual income tax rates and adjusted income tax brackets.