(HERALD) Zimplats in US$28m tax fight

Zimplats in US$28m tax fight
Monday, 09 January 2012 00:00
Daniel Nemukuyu Senior Court Reporter

GOVERNMENT has issued a US$28 million garnishee order against Zimplats to recover outstanding royalties. So far, over US$7 million has been deducted from the mining firm's bank accounts as a result of the Zimbabwe Revenue Authority order. The order was served on Stanbic Bank on November 16 last year and five days later, the bank had remitted to Government US$7 209 476 from Zimplats' accounts.

But Zimplats is contesting the order. The mining giant lost its bid to have the High Court urgently quash the garnishee order and force Zimra to return funds already deducted.

High Court judge Justice Francis Bere ruled that the matter was not urgent.
It will now be pursued as a normal court application.

The law requires all miners to remit royalties to the State.
Royalties are set as a percentage of gross production, regardless of profits, and are premised on the Government of Zimbabwe owning all the mineral rights, having bought them off the BSA Company in the 1930s.
Other taxes are profit-based.

Zimra's position is that when the Ministry of Finance took over the setting of royalties in 2009, rates were increased from 2,5 percent to 3,5 percent.
In 2010, Zimra argues, the rates were increased to five percent, but Zimplats reportedly continued remitting royalties using the old 2,5 percent rates.

With effect from this month, the rate of mining royalties rose to 10 percent.
In the court papers, Zimplats chief finance officer Mr Patrick Museva-Shayawabaya argued that Zimra acted unlawfully when it issued the garnishee order, adding that the figure of US$28 million was still in dispute.

It is Zimplats' argument that the calculations were erroneous.

The firm also argues that in terms of the Mines and Minerals Act, the mining agreement should be used under the circumstances and not a garnishee order on the strength of provisions from the Finance Act.

The company submitted that the US$7 million already deducted was seriously affecting its operations.

Scanlen and Holderness law firm is representing Zimplats, while Zimra's internal legal department is acting for the authority.

Zimra regional manager for domestic taxes Mr Moses Madongorere defended the taxman arguing that the authority's actions were lawful.

He stated in an affidavit that despite a contest by Zimplats, the debt continues to escalate.

Mr Madongorere said the rates being used were set by Parliament and not by Zimra and that Zimplats was trying to challenge a Parliamentary decision.

He said the calculations used in arriving at the figure of US$28 332 270 were correct.