[miningmx.com] — THE Namibian government’s proposals for additional taxes on mining could shake the foundations of the country’s industry, according to industry players in the southern African state.
One of the proposed amendments to tax legislation announced by the government in July, involves mines having to pay value added tax of 15% on the export value of unprocessed minerals, as well as a 5% export duty.
Also, the income tax rate for the industry would be increased from 37.5% to 44%.
Windhoek analysts estimate that the impact of the new taxes on mines’ profits could be as much as 15%. This would render the business plans of many of Namibia’s new and existing mines unworkable, said Namibian economist Robin Sherbourne.
The Namibian government has big development plans but does not know how to fund them, he said. The main reason for the new plans is that the state urgently needs to broaden its tax base to compensate for lost income from the Southern African Customs Union (Sacu).
He added that the government had also renewed its focus on industrialisation and the beneficiation of raw materials, since these industries go hand in hand with job creation.
Sherbourne said mining in Namibia was already heavily taxed and any additional taxes could severely impair industry growth. This is a very sensitive period for Namibian mining, he said.
The industry has significant potential to grow, but it requires significant capital injection. If the taxes under discussion were introduced the money supply could be cut off.
Mining already makes the biggest contribution to Namibia’s fiscus. Veston Malango, the chief executive of the Chamber of Mines of Namibia, said the Minister of Finance has already announced the new taxes and now wants consultation with the Chamber. The entire industry is busy compiling reports to explain the impact of the taxes to the minister.
Namibia has an unemployment rate of more than 50%. Some 8,000 people are directly involved in the industry, with many thousands more involved indirectly.
Windhoek mining analyst Steve Galloway said the government wants mines to add greater value in Namibia before minerals are exported.
But, he said, all the value that could be added was already being done. Uranium, for example, is processed into uranium oxide before being exported. It is not believed that uranium can be processed further than this in Namibia.
Uranium and diamond mines are Namibia’s biggest mining assets.
Galloway said the government also plans to tax companies on turnover rather than profit. This means that, no matter whether a mine turns a profit or not, it would be taxed on turnover.
An analyst who wishes to remain anonymous said that if the taxes were to be introduced, there was the danger of other member states of the Southern African Development Community (SADC) considering similar measures.
Malango said the industry’s delegates would soon meet the Minister of Finance to discuss the issue further.
– Sake24
