The Sunday Mail
Tinashe Makichi
The Ministry of Mines and Mining Development has submitted proposals to Treasury on amendments to the fiscal law that stops mining companies from claiming royalties for tax purposes.
The issue of double taxation has been topical with Minister Walter Chidakwa last year stressing that the practice is becoming an impediment to investment in the mining sector.
Mining royalties are charged in terms of the Mines and Minerals Act (Chapter 21:05). The royalties are collectable from all minerals or mineral bearing products obtained from any mining location and disposed by a miner or on his behalf. The royalties are chargeable whether the disposal is made within or outside Zimbabwe.
However, after paying royalties to Government, miners are then taxed by the Treasury through the Zimbabwe Revenue Authority, hence the non-deductibility of royalties as a tax expense.
Mines and Mining Development Permanent Secretary Munesushe Munodawafa said they have reviewed the double taxation of miners and are awaiting input of the Treasury.
“The SI on double taxation royalties will be amended. There is an anomaly in the current system that royalties have been deducted in terms of the current laws. We are still taxing the miner as if there is no other deduction that has taken place so we have submitted proposals to the Treasury and the new amendments will be announced in the 2018 National Budget,” said Munodawafa.
Precious stone miners pay 15 percent of gross revenue in the form of royalties to Government, while gold miners pay 5 percent. Platinum miners are paying 10 percent and the base metals and industrial minerals’ miners are paying 2 percent. Coal miners are paying one percent as royalty fees and these fees are still considered the highest in the region.
The Chamber of Mines Zimbabwe has been pushing Government to conclude the review of the country’s mining tax regime by the end of 2017.
Miners argue that Zimbabwe’s various fees and levies make the country one of the most expensive countries to operate in, with an estimated 60 percent of every dollar earned in revenue going to several Government departments.
Miners have raised concern over the current tax regime, saying a plethora of taxes and levies is affecting viability.
Moreover, the sector is facing several challenges, among them depressed mineral and metal prices, high labour costs, capital and foreign exchange constraints and high energy costs.
The various taxes and associated fees places the fiscal regime, which includes mineral royalties, corporate income tax, additional profit tax and withholding tax; among the highest in the region.
A royalty is calculated as a percentage of the gross market value of minerals produced. Currently, mining companies are subject to the three types of taxation, namely direct taxation, indirect taxation and non-tax instruments.
