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Chamber of Mines clears air on mining royalties

Chamber of Mines clears air on mining royalties

Business Reporter

THE Namibia Chamber of Mines (NCM) has dismissed reports suggesting that mining companies do not pay enough taxes, stating that in comparison to other regional jurisdictions, Namibia’s corporate tax rate for mining is considerably higher – with a 37.5% corporate.

In comparison, South Africa has a corporate tax rate for mining companies of 28% (excl. gold) and Zambia has a tax rate of 30%.

SETTING THE RECORD STRAIGHT: Zebra Kasete, mining chamber’s president. Photo: Contributed

NCM president, Zebra Kasete, noted that it is a common misperception in Namibia that the country has a rich endowment in mineral resources.

“Namibia operates some of the lowest grade mines in the world as there are very few high-grade mineral deposits. Namibia is rich in low-grade resources and these resources could only become economically viable given an attractive taxation regime,” said Kasete.

Kasete added that any comparison of revenue with corporate tax paid is bound to be misleading, given the capital-intensive nature of mining, and more importantly, the differing levels of maturity and profitability of mining companies.

“All companies in Namibia, including mining companies, are permitted to write off their development capital expenditure over a period of three years for tax purposes. This encourages Foreign Direct Investment (FDI) and assists companies to reach bankable feasibility and required return on investment for their projects. This is not an abnormal concession by GRN, it is normal practice throughout the world,” Kasete explained.

He further noted that companies such as Namdeb have been operational for decades, have written off their initial capital expenditure (money spent by a business or organisation on acquiring or maintaining fixed assets, such as land, buildings, and equipment) many years ago, and as such, their taxable income is far higher than it would be, for example, for a new mine or a mine that has only been in operation for a few years.

He further stated that taxing rates are unsustainably high in the diamond industry.

He added that a 55% statutory corporate tax rate is charged to diamond mining operations is in addition to the 10% royalty on gross sales payable by diamond miners.

This compares to the 37.5% corporate tax rate and 3% royalties, plus 1% export levy on gross sales paid by the non-diamond mining companies.

“Not only is the diamond industry required to pay far higher taxes, but the revenue to the treasury is also supplemented by the dividends payable to GRN owing to its 50% partnership. It is clear that the effective taxation rates, including royalties, levies and corporate taxes, of the diamond industry are completely unsustainable in the long term and are likely to bring about the premature closure of Namdeb’s land-based operations with the loss of many thousands of jobs,” he said.

Kasete stated that 20% of the revenue and well over 50% of the profits generated by the mining sector is paid over to government’s coffers. This comprises of corporate tax, royalties and levies on gross sales, dividends to government and personal income tax (PAYE) paid by individuals employed by the mining industry corporate tax rate of 30%.

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