Mining companies contest new tax

Mining investors are locked in negotiations with the government over the rate of a proposed new tax called the Royalty Tax, through which the government is expected to earn more revenues from the increasingly lucrative industry.The bill introducing the tax was tabled before the Lower Chamber of Parliament last year by the Minister of Finance, John Rwangombwa, who said the decision was based on research on how Rwanda’s economy could grow if its resources are adequately tapped.This was echoed by the Minister of Natural Resources, Stanislas Kamanzi, who in July this year told parliament that taxes collected from mining are “very little” considering the size of the industry.If the bill is passed, the new tax will be levied on mining and quarry exploitation.Royalty tax rates on mines would be fixed at 4 percent of the norm value of basic metals and other minerals, 6 percent of the norm value of gold and precious metals, and 6 percent of the gross value of diamonds and other precious stones.However, the rates are being contested by investors, who argue it’s an extra burden since they are already paying several other fees to district administrations, to Geology and Mines Department (GMD) and fees for tagging minerals.“We are working on a document which we shall present to the Ministry of Finance to negotiate for lower rates. We understand the reason why the royalty tax is being introduced but for it not to be a burden, it should be practical for both the mining fraternity and the government,” an official in the mining sector commented on condition of anonymity.The Commissioner for Domestic Taxes at Rwanda Revenue Authority (RRA), Celestin Bumbakare, said the tax should not be considered as a burden to the private investors because it is essential for improving business in a country’s exhaustible resources.“Most countries with mineral resources implemented royalty tax, so it is not a new innovation for the mining industry. The law will be implemented as soon as the negotiations conclude in order to generate more income to the government,” Bumbakare said.The law states that a person required to pay royalty tax on mines shall submit monthly tax returns in the form prescribed by the Commissioner General within fifteen days after the end of the month in which export of minerals was done.It however also states that the Commissioner General may exempt from liability royalty tax samples of minerals exported for purposes of essay, analysis or other examinations.Another investor in the mining sector, who also preferred anonymity, told The New Times that the introduction of the tax was not well-timed considering that most mining companies’ contracts had expired.“You could say that most of the mining companies at the moment are operating illegally because their contracts ran out and haven’t yet been renewed. How do we pay taxes when we don’t have contracts? So, before introducing the royalty tax, it would be better if the issue of contracts was settled first,” the investor said.Meanwhile, the Director General of the Geology and Mines Department in the Ministry of Natural Resources, Michael Biryabarema, said the government was at the moment issuing out short term three-month contracts to mining companies as it prepares more detailed long term contracts.“Mining companies want long term contracts of five to thirty years, but before they are issued out, all details must be clear on how both the government and investors will benefit,” Biryabarema said yesterday.The mining sector has over the years rejuvenated to become a priority foreign exchange earner, whereby, it fetched over $150 million in 2011 and employs over 32,000 Rwandans.

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Mining companies contest new tax