Deductibility of royalty for taxation
Current Government policy in Zimbabwe does not allow royalty as a tax expense, thus significantly increasing the effective tax, undermining the competitiveness of Zimbabwe as a destination of investment. Traditionally, as in the case in all countries, royalties which are levied on gross revenue are considered a direct cost and qualify as a cost for tax purposes.
The Chamber of Mines have also raised the matter with the Minister of Finance and Economic Development and have submitted findings of their survey on the same which shows that the majority of mine jurisdictions, including renowned mining countries such as Australia, Canada, China and others allow royalties as a tax expense.
THE TEMPORAY SPEAKER: Hon. Member, could you highlight your recommendations from your Committee.
HON. MUNENGAMI: These are the recommendations. Unfortunately, I think they are a bit long. Like I said, I have been given this report just now, so I am just going through the recommendations as they are. I will try to shorten maybe some of them.
Royalty on diamonds
Royalty on diamonds was retained at 15%. We appeal to Government to reduce the royalty rate for diamonds to 10% with a view to restore viability in the diamond sector and also in line with best practices.
Review of the mining fees
Ground rental fees for diamonds were reduced from $3000 per hectare per year to $225. We appeal to Government to consider a comprehensive review of the existing fee structures in line with proposals from stakeholders in the mining industry in order to restore viability of the industry.
Restoring viability in large scale gold sectors – that is another recommendation.
Foreign payment challenges
This must be adequately addressed. The mining industry continues to experience foreign exchange challenges which must be adequately addressed. The mining industry continues to experience foreign exchange challenges which have manifested in delays in foreign payments for importation of critical raw materials for production and we appeal as a Committee for Treasury to ensure that the Reserve Bank of Zimbabwe increases mining company retention threshold for platinum, gold and chrome to around 40% to ensure they import adequate raw materials on time. I think these were the recommendations for the Ministry of Mines and Mining Development.
Now lastly, I will go to the Ministry of Energy and Power Development. The recommendations are as follows:-
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