Industry players hopeful about proposed mineral tax changes

Industry players have said that proposed changes to taxes on minerals, including a major cut in gold rates, could spur interest in processing and contribute to higher revenues from precious metals and stones. According to the government, the proposals in a new draft law establishing a tax on minerals are meant to promote value addition by setting lower rates for minerals supplied to local smelters and refineries, and at the same time, discourage the exportation of unprocessed ones through higher rates. Gasabo Gold Refinery (GGR) Managing Director Bosco Kayobotsi told The New Times that the facility was working at 30 per cent of its capacity, blaming the situation on a high tax rate — six per cent — on gold which was negatively affecting the profitability of traders. GGR is a mineral processing company established in Rwanda, specialised in adding value to silver and gold, and serving local, regional, and international clients, according to the firm. With the tax rate going down to 0.5 per cent as proposed in the bill, he said, the mineral business could be boosted and more gold could be sourced from various places and supplied to the refinery. “We have a capacity to refine eight tonnes of gold per month, but we work at 30 per cent of that on average because of low supply,” he said, pointing out that the situation was due to the fact that the 6 per cent tax on gold that must be paid by exporters was high. Article 4 of the new bill (proposed) sets low rates of mining royalty tax applicable to minerals supplied to the local processing facilities to encourage value addition. The tax rates are three per cent of the norm value for base metals; two per cent of the gross value for gemstones (minerals used in jewellery such as diamond); and two per cent of the norm value for platinum group metals. Others are rare earth elements (high-tech metals such as uranium) that could attract a two per cent tax rate of the norm value, energy minerals (such as lithium and cobalt) with three per cent of the norm value; and the category of gold with 0.5 per cent of the norm value – which is the lowest proposed rate of all. ALSO READ: Six key proposed changes to Rwanda’s mineral tax law The Chairperson of Rwanda Mining Association, Jean Malik Kalima, said the mining sector commends its engagement in mineral taxation negotiation and decision-making related to the development of the industry, making it one of the biggest earners of foreign currency. Currently, he said, minerals exported from Rwanda are predominantly raw, pointing out that traders are affected by treatment (refining) charges when selling raw minerals at international markets, including the London Metal Exchange (LME), which is considered the largest base metal market such as cassiterite (tin). “And we are in a context to make Rwanda a hub in mineral trading, especially in the gold sector where we want to encourage other countries to use the facilities [refineries and smelters] we have that are not available there,” he said. By reducing taxes on minerals including gold, he said that the move could attract investors to the country, and stimulate interest in selling processed minerals. “It can help attract foreign mineral investors into the country because [high] taxes were weighing down on them, and help local investors to increase output,” he said. As per the explanatory note of the bill, certain tax rates provided for under the existing law are excessively high, citing six per cent imposed on the norm value of gold which it said is considered punitive. Meanwhile, Article 5 of the bill (proposed) sets additional tax rates applicable to exported raw minerals to discourage such a practice. The additional rates are two per cent of the norm value for base metals; three per cent of the gross value for gemstones (including diamond); two per cent of the norm value for platinum group metals, one per cent of the norm value for rare earth elements, two per cent of the norm value for energy minerals; and 0.5 per cent of the norm value for the category of gold. On imposing an additional 0.5 per cent tax rate on raw gold exports, Kayobotsi said it will discourage such a business, but rather make traders want to export the refined mineral as 0.5 per cent of the value of gold. By exporting raw gold, he observed, traders incur unnecessary charges including transport fees on the amount that turns out to be impurity after refining is done abroad to get pure gold. According to data from Rwanda Mines, Petroleum and Gas Board (RMB), Rwanda’s mineral export revenue rose to more than $1.1 billion (approx. Rwf1.4 trillion) in 2023, up from $772 million recorded in 2022, representing an increase of 43 per cent, while the target is to generate $1.5 billion by the end of 2024.

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Industry players hopeful about proposed mineral tax changes