Namibia: New Tax Will 'Devastate' Mines | Ghanamma.com

Tuesday, July 17th, 2012 |

GOVERNMENT?S plan to push ahead with an export levy for mines, effectively charging mines up to two per cent tax on their income in addition to an array of existing taxes and royalties, will devastate the industry, the Chamber of Mines of Namibia warned yesterday.

The Ministry of Finance last Thursday presented the chamber with its proposal, giving the industry two weeks to respond. By yesterday, the chamber was feverishly investigating by how much the levy would hurt the industry?s bottom line.

Finance Minister Saara Kuugongelwa-Amadhila last year introduced an export levy as part of severe tax hike proposals for the mining industry. After the chamber warned her that mines would shut down as a result, she watered down her proposed export levy from five to two per cent. Some of her other proposals were scrapped, while others remained.

If Government?s current export levy proposal is implemented as is, it would have ?serious implications? on existing mines and planned projects in Namibia, Veston Malango, general manager of the chamber, yesterday told The Namibian.

Not only will it make investors of new projects think twice, it will also affect planned expansions at existing mines. ?It would stifle growth,? Malango said.

Deputy Finance Minister Calle Schlettwein told The Namibian that the proposed export levy will be at most two per cent of the export value of the raw product of a mine ? in other words, on the revenue of a mine.

Schlettwein said the ministry would like to table the necessary legislation during the next Parliamentary session so that the tax can become effective during the 2013-14 financial year.

Malango said although the proposal in theory talks about zero and two per cent, the ministry currently doesn?t differentiate and that a levy of two per cent is applicable on all metal and mineral exports.

Non-diamond mines already pay 37,5 per cent corporate tax on their profits to Government, plus dividends, royalties and non-resident shareholders? tax. In 2010, Namibia?s seven biggest mines paid N$1,9 billion in total in these taxes, royalties and dividends.

Should an export levy of two per cent become law, mines will have to pay this on top of these taxes, royalties and dividends.

The scenario for diamond-mining companies is even bleaker, as they have to pay 55 per cent corporate tax plus royalties. Namdeb last year said it is subject to an effective tax rate of more than 75 per cent, and asked the Chamber to start lobbying Government for a softer tax stance toward diamond mines.

Malango yesterday said negotiations in this regard are ongoing.

He said the industry fully supports Government?s drive to stimulate value addition in the country, which is the rationale behind the export levy on raw materials. However, there seems to be a misunderstanding between Government and the industry on what value addition entails, he said.

Malango said rather than ?penalising? mines by introducing the export levy, Government should rather push Namibia?s comparative advances and lure big companies and skills to the country which are in the business of adding value to metals.

Besides the export levy, Government also intends to introduce a surcharge formula as a windfall tax on profits, to push up non-resident shareholders? tax (NRST) from the current ten per cent to a proposed 20 per cent, and to tax the trading of mining licences and management fees paid to non-resident parent companies.

Copyright ? 2012 The Namibian. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections ? or for permission to republish or make other authorized use of this material, click here.

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Source: http://www.ghanamma.com/2012/07/namibia-new-tax-will-devastate-mines/

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