President Robert Mugabe’s government says it intends reviewing Zimbabwe’s mining royalty and tax system with a view to making the country an attractive mining investment destination.
Deputy Mines and Mining Development Minister Fred Moyo told Parliamentarians at a pre-Budget seminar in the resort town of Victoria Falls that the review process sought to align the country with other mining destinations in Southern Africa, whose mining royalties and taxes were much lower than Zimbabwe’s.
“A thorough review of the tax and regulatory environment for mining is needed. The tax system must be simple . . . Zimbabwe’s mining royalty rates are among the highest in the region, which does not augur well for the country as a mining investment des- tination,” Moyo said. He described the current tax and royalty system as “too fragmented, cumbersome and requiring immediate revision” to enhance administration. He added that the tax system should allow investors to receive profitable returns from their investments without prejudicing the Zimbabwe treasury.
Moyo admitted that government now realised that the high royalties and taxes scared potential investors away.
Mining companies operating in Zimbabwe are required by law to pay 25% of their earnings in corporate tax, besides royalties ranging from 1% to 15%, as well as other taxes. Further, mining companies are required to pay 2% in presumptive tax and a 0.8% levy to the Minerals Marketing Corporation of Zim- babwe. They also have to pay significant amounts to obtain special grants and exploration licences.
The Chamber of Mines of Zimbabwe says mining companies spend up to 60% of their earnings on tax and royalty payments, which affects the viability and attractiveness of the country’s mining industry despite the country being hugely endowed with a diversity of mineral resources.
Chamber president Alex Mhembere says mining companies want government to simplify the mining taxation and royalty system. “We have a fragmented tax system that makes it difficult for the National Treasury to account for money that comes from the mining sector. We call on government to streamline the mining taxation system.”
Further, he said the government still had to attend to other factors impacting on the operations of the sector. These included persistent long-duration power cuts, poor road and rail networks, high transport costs, a shortage of water and the ongoing liquidity crunch, which had forced companies to retrench workers as they scaled back on new and expansionary projects.