Government is working with the Royal Norwegian Embassy and the World Bank to develop a new Mining Fiscal Regime network which will create an efficient transparent and productive tax system.
Finance and Economic Development Minister Patrick Chinamasa told delegates at the Chamber of Mines 76th annual general meeting last week that the current mining fiscal regime had its challenges which have created a host of distortions and administrative challenges.
“The current mining fiscal regime provides for generous tax concessions that are intended to attract investment given that mining is highly capital intensive.
“However, we have noted inefficiencies, distortions and administrative challenges that the new regime seeks to address.
“Technical details underpinning the regime are still work in progress. We are, however, working with the Royal Norwegian Embassy and the World Bank to develop the framework.”
Minister Chinamasa also said that the new regime will seek to do away with the multiplicity of stakeholders in the mining sector all of which seek to impose levies.
“Local Authorities, the Zimbabwe Revenue Authority, the Environmental Management Agency, Ministry of Mines and Mining Development, Rural District Councils, Zimbabwe Mining Development Corporation and the Minerals Marketing Corporation of Zimbabwe all have levies against the mining sector.
“This unco-ordinated collections negatively affect the sector’s viability, transparency and accountability. Such a scenario confuses investors and makes the investment approval process cumbersome.”
Other problems with the current regime includes transfer pricing and thin capitalisations where high-geared institutions enjoy tax relief on interest charges.
“Effectively thin capitalisation is employed to avoid paying tax in the host country”
He added: “From a tax management perspective, it suffices to say that there is need for an efficient, transparent, administratively simple and productive tax system. These are the basic principles that are central to the design of any tax system.”
Minister Chinamasa said there was need for Government to strike a balance between revenue generation and to attract investment into the mining sector.