LIVINGSTONE MARUFU
Government has intensified surveillance in the mining sector in an attempt to curb mineral leakages, a senior Cabinet minister has said.
The government will launch a blitz to address the issue, according to Professor Mthuli Ncube, Minister of Finance, Economic Development, and Investment Promotion.
“Government will continue to prioritise curbing of mineral leakages through intensifying monitoring and surveillance of the mining sector by undertaking combined blitz by all relevant government institutions,” Prof Ncube said.
It is estimated that Zimbabwe could be losing around US$2bn annually to leakages.
Professor Mthuli Ncube said gold’s revenue does not tally to tax contributions.
“The mining sector contributes significantly to the country’s gross domestic product accounting for 12.8% and 13.2% between 2021 and 2022, respectively.
“The contribution of the sector to total revenue has remained subdued, since it contributed 13.1% in 2021 to total revenue with platinum accounting for 77% of the revenue. The contribution of gold remains insignificant at 0.33% despite accounting for about 32% of mineral exports,” Prof Ncube said.
Analysts suggested that the country should totally liberalise the gold sector to combat smuggling and compete at the highest level with foreign gold buyers.
Last year, around 30 tonnes of gold were delivered to Fidelity Gold Refinery (FGR), with around 20 tonnes estimated to have been smuggled out of the country.
According to analysts, the hostile laws that impact the competitiveness of the sector and smuggling have resulted in significant income losses for the country.
The nation gives large-scale miners a 75% retention rate in foreign exchange, whereas small-scale miners receive 100% of the foreign exchange but must pay significant royalties and import fees.
As a result, they receive less gold at global prices.
Yesterday’s gold price was US$65 340 per kilogramme, but with royalties and other punitive costs small scale miners get under US$61 000 per kg.
Gold Miners Association of Zimbabwe chief executive officer Irvine Chinyenze said the liberalisation of the gold sector would bring competitiveness.
“The liberalisation and reduced tax regime would also increase gold deliveries and export receipts which will help the fiscus,” Chinyenze said.
In his 2024 Budget Presentation, Prof Ncube said low fiscal revenues generated from some of the minerals is reflective of the preferential structure of the tax regime, low levels of beneficiation as well as potentially high levels of tax avoidance and evasion.
“ I, therefore, propose measures that seek to generate optimal revenue to the Fiscus as follows: I propose that no transfer of mining rights shall be approved without payment of Capital Gains Tax and Stamp Duty or any other tax due on the value of the transaction.
“Failure to abide by this condition shall render the disposal or lease of mining rights null and void.
“In addition, I propose that all documents or agreements for transfer or disposal or lease of mineral rights be lodged with the State for review and approval before the transaction is concluded,” he said.
The Treasury said in view of the recent developments where mining rights are disposed of privately outside the country and at astronomic prices, it proposed that revenue derived therefrom be shared equally with the State.
“Furthermore, in order to enable the government to track the movement of mining rights for tax purposes, I propose that a register of mining rights with a record of applications, grants, variations, dealings, assignments, transfers, suspensions and cancellations of rights be maintained and accessible to the Zimbabwe Revenue Authority.
“Whereas transfer of a mining right is a sale that should attract Capital Gains Tax, this has, however, not been the case, since assets are transferred without the knowledge of ZIMRA.
“I, therefore, propose that all agreements for the transfer or disposal or lease of mining rights should be lodged with the State, reviewed and approved before they are implemented,” the Treasury boss said.
The Treasury proposed that holders of mining rights be obliged to inform the government of the intention to transfer or lease such rights before the transaction occurs, failure of which a penalty will be applied to enhance the capacity of the Tax Administration.
