MUTARE- Local Civic Society Organisations (CSOs) have called for re-negotiation of ‘de-facto’ tax incentives within the Platinum sector, chiding the new dispensation for extending a begging bowl to procure COVID-19 vaccines, while awarding tax holidays to miners.
CSOs said current Tax (CIT) rates of between 14% and 25% which are below the regional average are already a major worry ‘because Zimbabwe must not take a leading position on the race to the bottom – using lower tax rates to woo investors.;
In a joint press statement, Southern Africa Resource Watch (SARW) and Zimbabwe Environmental Law Association (ZELA) said government was pursuing destructive policies following a five-year tax holiday awarded to a platinum mine operation, Great Dyke Investments.
ZELA and SARW said from views gathered at a special meeting for civil society in the sector, there was a negative perception of this move which has dire consequences on the financing of health, education, and public infrastructure sectors.
They said it was ironical for Zimbabwe to beg for funds to secure COVID-19 vaccines despite granting a tax exemption reportedly worth US$100 million to Great Dyke Investments (linked to business mogul Kudakwashe Tagwirei), under the Income Tax (Exemption from Income Tax) (Great Dyke Investments) Notice of 2021.
“Already, the capacity of the government to raise revenue from the extractive sector is weakened because the sector is enjoying a wide range of other mining fiscal incentives. Among other fiscal incentives, the mining sector is accessing duty concessions (i.e. rebate of duty on goods for the mining industry).
“The government is still to realign Corporate Income Tax (CIT) rates of between 14% and 25% which are below the regional average. The CIT rates are deemed as competitive, a major worry because Zimbabwe must not take a leading position on the race to the bottom – using lower tax rates to woo investors.
“The platinum royalty rate which was due for review in August 2020 has not been reviewed and is still pegged at 2.5% against buoyant prices of palladium and rhodium, all part of the Platinum Group of Metals (PGMs).
“Another ‘de-facto’ tax incentive is the absence of competitive bidding concerning the disposal of platinum claims repossessed by government from established platinum mines like Zimplats and Anglo American owned Unki Mine,” read part of the statement.
The CSOs also noted that mineral governance in Zimbabwe is contrary to policy recommendations of the Africa Mining Vision (AMV) for mining fiscal linkages, to dispose high geological potential mining claims to huge signature bidders.
ZELA and SARW called on government to weigh costs of tax incentives given the current socio-economic crisis and contribution of mining to national revenue, targeted to upscale under the US$12 billion mining economy roadmap and Vision 2030.
Tax incentives, equates to tax revenue forgone and a detraction from the domestic resource mobilisation agenda, said the CSOs- pointing to ‘lack of transparency and accountability in the granting and administration of tax incentives as detrimental to national interests’.
Government was also urged to set up a Public Registry on Beneficial Ownership Disclosure in line with Section 315 of the Constitution- to rid conflict of interests on mining concession and ensure transparency, honesty, cost-effectiveness, and competitiveness.
“Government must revamp its laws to include a public registry on BO; publicly report and account for tax incentives – cost benefit analysis, contract transparency and embracing open contracting; review double taxation agreements; and introduce a sliding royalty scale in the platinum sector as the case with gold.
“Knowing the identities of natural persons behind the operations removes any negative perceptions relating to conflict of interest by responsible public officials in the negotiation of tax arrangements. It also unmasks the identities of rogue investors who hide behind complex structures, shell companies and Trusts, which makes due diligence easier, for instance.
“Notably, Zimbabwe’s new Companies and Other Business Entities Act now provides for beneficial ownership disclosure. A huge limitation is that there is no provision of a public registry on beneficial ownership.
“It is fundamental for government to publicly release such documents to the public domain to instill public confidence on the justification and rationale for awarding additional tax incentives in the middle of project development,” read part of the statement.
Zimbabwe was also advised to urgently review her existing Double Tax Agreements (DTAs) or suspend them before reviewing them to protect its tax base and stop the continued economic bleeding through Illicit Financial Flow (IFFs).
Other partners in the CSO alliance also include Tax Justice Network Africa, Transparency International Zimbabwe (TIZ), Centre for Natural Resource Governance (CNRG), Action Aid Zimbabwe, Women and Law in Southern Africa, African Forum and Network on Debt and Development (AFRODAD), International Senior Lawyers Project and Zimbabwe Diamond Allied Workers Union (ZIDAWU).