Government to slash mining income tax Very interesting post on Cam's blog
Government to slash mining income tax
-Mining to become first sector to enjoy income tax reduction
Allana Potash economics and IRR receive a hefty boost
The Ministry of Mines has tabled a draft proclamation to reduce the Ethiopia‘s mining income tax from 35 to 25 percent.
Current the broadly applicable income tax proclamation regulating all businesses except mining and petroleum sets the flat rate of 30 percent across the board. According the draft, the reduction is aimed at enabling the mining sector in Ethiopia to meet the targets set in the five-year Growth and Transformation Plan (GTP) for the sector.
The ministry on Thursday presented the draft proclamation to amend the existing mining income tax proclamation to the House of Peoples’ Representatives. The House deliberated on the draft proclamation and remanded it to the Natural Resources and Environmental Affairs Satnding Committee. The draft stipulates that companies engaged in large-scale mining in Ethiopia will pay 25 percent income tax to the government.
The standing committee will evaluate the draft proclamation and come up with proposals that are intended to enrich the proclamation.
Explaining to the House why it was necessary to amend the mining income tax law, the ministry said though the country is endowed with minerals such as gold, tantalum, iron and potash, the sector’s contribution to the country’s economic development is still minimal.
According to the ministry, the revenue secured from minerals and quarries contributes only one percent to the country’s GDP. The investment capital in the mining sector has reached 14 billion birr. Annual export earning from minerals resources reached USD 645 million in the last budget year. The ministry anticipates boosting foreign direct investment in the sector, thereby increasing the revenue the country earns from minerals export.
Another justification for the reduction cited in the draft was the need to make the country’s mining sector more competitive in comparison to other African countries which have successfully exploited their mineral resources. The fact that these countries have better infrastructure which facilitates mining activities and at the same time have in place a lower income tax rate than Ethiopia necessitates the introduction of the amendment, the draft added.
Large-scale mining is still an emerging sector in Ethiopia. So far, MIDROC Gold is the only company that is engaged in large-scale gold mining. Recently, Ezana Mining secured a large-scale gold mining license from the ministry. The British company Nyota Minerals has also applied for large-scale gold mining in its Tulu Kapi gold mine in the Wollega zone of the Oromia Regional State. But the ministry did not yet grant it the license.
The Canadian mining company, Allana Potash, is to start large-scale potash mining in the Afar Regional State. The Australian mining giant BHP had earlier pulled out of its potash mine in Afar for an undisclosed reason. Other companies such as the Indian Sainik Potash are working on potash mines in the Dalol depression. The Brazilian mining giant, Vale, is prospecting for gold in the Konso woreda in south western Ethiopia. A UK company, Stratex, struck a commercial gold deposit in the Afar region. Other foreign mining firms are also prospecting for iron, gold and base metals in different parts of the country.
https://allanapotashblog.org/2013/06/15/government-to-slash-mining-income-tax/