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Plans to repeal crippling taxation on cards

by Staff reporter
26 Feb 2021 at 06:55hrs | Views
THE Ministry of Mines and Mining Development is currently engaged in major discussions with fiscal and monetary authorities to address the issues of the punitive tax regime and surrender thresholds that are threatening the operations of the mining sector.

Players in the mining sector have bemoaned the tax regime, which they say has crippled their operations. The sector has also expressed concern over the recent increase in the foreign currency threshold by the Reserve Bank of Zimbabwe from 30% to 40%.

Mines and Mining Development minister Winston Chitando told Zimbabwe Independent in an interview on Wednesday that his ministry is seized with the issues that threaten the viability of the sector.

"With respect to fiscal and monetary issues, the fiscal issues, the plan is to come up with a consolidated fiscal plan where miners will not be subjected to a multiplicity of taxes, but they will all be consolidated," Chitando said.

"The plan is being worked on by the Ministry of Finance and we believe that it shouldn't be too long before it is concluded. On the monetary issues there is the issue of changes to retention thresholds which you mentioned and there are discussions taking place between the Chamber of Mines of Zimbabwe, the Ministry of Mines, the Reserve Bank of Zimbabwe and the Ministry of Finance over this issue. It's a matter which is being looked at."

Mining contributed just over 50% of the country forex receipts in the first nine months of 2020. From the forex retention and mandatory liquidation rules, the sector contributed uS$800 million to the RBZ auction system in the first nine months of 2020.

The development comes amid repeated calls for a major review of the country's mining tax rules and as industry feels overtaxed and trapped in a web of a multiplicity of taxes, which, according to some experts, deters fresh capital inflows into the industry.

Taxation complications also stem from an outdated mines and minerals act, which is to be amended by June 2021, according to Chitando. The act was sent back to Parliament by President Emmerson Mnangagwa for certain sections of the bill to be reviewed.

"The drafting of the amended act is now complete, it's now going through due process and we target that by June 2021 it will be law," Chitando said.

It also follows concerns over the country's policy inconsistency which, together with corruption and erratic power supplies are among the major reasons which deter the much-needed investment into the sector.

Government this week also made a u-turn on mining fees by repealing a Statutory Instrument which had pegged the charges in united States dollars, giving in to immense pressure from small-scale miners, who described the new structure as prohibitive.

The new instrument (SI46), announced late Tuesday, has fees denominated in the Zimbabwean dollars and repealed its predecessor (SI45) which was made a few days earlier, in apparent manifestation of bad governance in the form of policy inconsistencies, which are among the major reasons the country struggles to secure investment.

In January, the RBZ made changes to foreign currency retention thresholds, which the miners are saying will exert pressure on their operations.

RBZ chief John Mangudya in his recent monetary Policy Statement (MPS) said the bank would maintain and sustain the auction system through the 40% export surrender requirement, 20% domestic foreign exchange sales proceeds surrender requirement and 15% foreign exchange contribution from the fiscus.

So far, the auction system has doled out uS$795 million, 70% of which went to raw materials.

In January, Mangudya made a raft of major reforms to stabilise the foreign exchange market, including immediately scrapping the much-loathed compulsory requirement to liquidate all unutilised export proceeds within 60 days.

This comes after industry raised concerns over the compulsory liquidation of unutilised funds into the weakening and unstable local currency in 60 days, saying it erodes value.

The move was largely seen as a positive on the country's ease of doing business scorecard, especially coming on the heels of a ministry of finance directive to tax business in the respective currency of transaction.

Mangudya, however, resolved to increase the export surrender requirement from 30% to 40% on all export receipts, effective January 2021.

He also said the monetary Policy committee resolved to maintain the liquidation requirement for domestic foreign exchange sales at 20% net of sales tax. These measures were maintained in the MPS.

Source - the independent

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