Maravi

(STICKY) New rule on mine tax overdue - CSPR

COMMENT - The Windfall Tax should immediately be re-introduced. It is the only way the state can collect taxes on the mines that are of any significance. And violation of tax obligations by mining companies should be harshy punished. No more messing around.

New rule on mine tax overdue - CSPR
By Gift Chanda
Tue 30 Oct. 2012, 14:50 CAT

THE Civil Society for Poverty Reduction says mining investors should not be unsettled by the new rule compelling them to start paying tax before recouping all their investment.

In his 2013 budget, finance minister Alexander Chikwanda cut the applicable capital allowance in the mining sector from 100 per cent to 25 per cent.

The chamber of mines, which represents foreign mining firms, said the new rule would discourage investment in new projects as mine operators would have to start paying tax before recouping all their investment.

But CSPR advocacy and policy dialogue programme officer, Sydney Mwansa said the new rule had been long overdue.

"Capital allowance in the mining sector was pegged at 100 per cent at the time of the global economic crisis to help the mines survive through that crisis and that crisis passed way a long time ago," he said.

"I think it is time those things which were put in place to help the mines survive the 2008 crisis are reversed so that the sector begins to benefit even the ordinary people."

And Mwansa said the government should have reintroduced the windfall tax to help lift the burden on a few employed people paying personal income tax (Pay-As-You-Earn).

"After analysis and reflections this year, where we tried to look at other possibilities of the government raising more revenues, we still arrive at the same position and this position is that we should have reintroduced the windfall tax years ago," he said.

"We still feel windfall tax is the best option as copper prices are currently still high. We feel that the windfall tax as a matter of agency be reintroduced. This is in view of other taxes which are not performing as much as they should; and this is the variable profit tax."

Investors who were irked by the doubling of royalties the government charges mining companies from three percent to six per cent in the 2012 budget are now more unsettled by the new rule compelling them to start paying tax before recouping all their investment.

Capital allowance is the reduction in the amount of corporation tax payable, offered as an incentive for investment in large-scale projects (that increase a country's production capacity and stock of capital). A certain percentage of the capital assets cost is allowed as capital allowance during the accounting period in which it was purchased. This amount is greater than the depreciation charge on the asset during that period.

Labels: ALEXANDER CHIKWANDA, CSPR, MINING, SYDNEY MWANSA, TAXATION, WINDFALL TAX

posted by MrK @ 6:49 PM