Miners call for inclusivity in tax amendments
Keikantse Lesemela | Wednesday November 12, 2014 12:59
Anglo American Group Head of Tax, Keith Tucker was speaking during the Commonwealth Association of Tax Administrators (CATA) conference on Monday here. He said governments should recognise specific characteristics of the mining industry, including relief for exploration infrastructure spending and appropriate reliefs for capital expenditure.
“The overall impact and interaction of all applicable taxes, the tax base and when a tax is levied is more important than any specific tax rate.
“So we would like to have a constructive dialogue with the governments as the industry. It is not about the rate of tax but it’s about how the system fits together,” said Tucker.
He said mining should not be treated like any other business as it is a long-term, high-risk, capital-intensive business, with long lead times from exploration through to mine development.
“Mining is a high risk business, starting from exploration, you put money at risk for a long time before the first dollar of revenue is earned. Governments need to understand the economic policies that they put in place,” he said. He explained that the effective tax rate would vary over the life of a mine even if the tax system remains constant.
“It is a function of multiple variables such as the stage in the mining and price cycle, mine location, mining methodology and costs, the mineral being mined, geological and technical complexity of the mine as well as broader country economic costs,” said Tucker.
Tucker also highlighted that types of taxes, when they are payable and the overall coherence of tax system are major factors when governments are considering the design of a fiscal regime.
‘The payback period, discount rate, projected cash flows are all impacted by the country’s fiscal policy. It therefore plays an important part in a company’s decision to invest whether for the first time or by way of expansionary or stay in business capital expenditure,” he said. Tuckler said the design of a fiscal regime is an important factor in promotion of investments, but should not be viewed in isolation to other macro and micro economic factors.
In Botswana mining accounts for half of national revenues and about 75 percent of foreign exchange income. On his note Botswana Unified Revenue Services (BURS) chairman, Taufila Nyamadzabo said the tax landscape is not getting any smoother. However, recently experts from the International Monetary Fund recommended that Botswana should seek to simplify its tax system.
“While we agree with the need to ensure that the average man on the street can understand the legislation, we must also accept that the way modern business is undertaken creates a challenge on the legislation to keep up. As a result, simplification of tax legislation is not currently an easy task,” he said.
He also explained that Botswana need to strike a balance between the need to ensure a robust legislation that covers both the current global economic environment but also lends itself to ease of understanding to the average man on the street.
Nyamadzabo said, the government remains committed to mining mineral resources for the betterment of the people of Botswana and therefore equitable tax system should be put in place.
“The introduction of a super-profits tax rate for non-diamond mining profits in 2001 together with recent amendments to the Income Tax Act that support the government’s commitment to sustainable land use through deductibility of contributions to a mine rehabilitation fund are further examples of our commitment to derive our fair share from sustainable and profitable mining activities in Botswana,” he said.
He said the topic on exchange of information is equally appropriate in these times of globalisation given the ease through which funds and capital move between countries.
“Exchanging tax information with other tax jurisdictions is an essential element for a transparent tax jurisdiction that is committed to ensuring fairness in the administration of tax.
“Given the importance of this topic to Botswana, the country found it critical to join the OECD Global Forum on Transparency and Exchange of Information in 2010. “I am happy that in March, 2014 Botswana passed Phase 1 of the peer review mechanism embodied in the Forum and we look forward to achieve the same level of success during 2015 when we will be undergoing phase 2 reviews,” he said.