[miningmx.com] — THE Namibian government on Wednesday backed down from several far-reaching mining tax proposals, saying a flourishing mining industry would be able to help it meet its revenue targets.
The announcement by Deputy Minister of Finance Calle Schletwein came after the government proposed in July that the zero-rating of value added tax on the export of raw materials be abolished and be replaced with a 15% VAT rate.
It had also proposed a 5% levy on the export of raw materials, as well as an increase in the corporate income tax rate for non-diamond mining activities to 44%, from the current 37.5%.
According to Thursday’s announcement, the zero-rating of VAT on the export of raw material would remain in place, while the 37.5% corporate tax rate would be maintained “in conjunction with a formula-based surcharge to capture additional mining revenue during better economic periods’.
The plan to introduce a levy system would also remain in place, but not at a 5% rate.
“Differentiated levy rates ranging from 0% to 2% are proposed to be applicable to different sectors of the economy, depending on the peculiarities of each sector,’ the statement read.
However, other proposed measures, for instance a non-resident shareholders tax of 20%, a 25% withholding tax on management fees and a tax on the income derived from the sale of rights and licences would be kept.
According to Schletwein’s statement, the proposed tax amendments were part of a government strategy to incentivise local value-addition to raw materials, but also to reduce the country’s dependency on revenue from the Southern African Customs Union’s income pool.
“An overriding concern was raised regarding the proposed revenue-based taxation, namely the abolition of VAT zero-rating of, and the proposed introduction of a 5% export levy on the export of raw materials,’ read the statement.
“The Ministry considered it expedient to reconsider some of the proposed measures in order to curb unintended consequences on businesses. In this regard, the Minister of Finance made specific proposals to Cabinet to review some of the proposed measures on which great concern was raised.’
Schletwein told Miningmx the most contentious issues among the proposed amendments were the export levy and VAT charge, as well as the higher corporate tax rate.
“When we discussed these issues with the sector, we took comfort from their undertaking that (the concessions) would increase investments,’ he said. “The normal tax collected on an extended base would make us achieve our revenue targets.’
De Beers country representative Daniel Kali said Namibia’s government had taken note and acted on the industry’s concerns. “It bodes well for the future,’ he said.
Schletwein said he anticipated that the remaining proposed measures would be in force by the 2012/13 financial year.
