Mthuli Ncube, a ‘minister of the rich’, refuses to tax platinum companies
Finance Minister Mthuli Ncube has been labeled a “Minister of the rich” following his intention to impose a tax holiday on companies that are exporting unbeneficiated platinum from Zimbabwe.
During debate on the provisions of the Finance Bill on Thursday, most legislators registered disapproval with a clause that intends not to tax companies that export raw platinum.
But Ncube defended the clause stating that the decision was made after consultation with government technocrats and International Monetary Fund (IMF) experts. He added that the decision was taken in order to ease the environment for doing business.
“They were basically arguing that we should not suspend this beneficiation tax. It should be maintained because they believe that the mining sector is not contributing enough to our revenue raising efforts,” he said.
“Colleagues, we really took time to think through this as Treasury, as Government and consulted widely. Also, I urge Hon. Members to read this clause as they consider it combined with Clauses 31 and 32 which pertain to the increase in the royalty for platinum sector and lithium from 2% to 5% because those were considered together. Although they sit apart in the Bill, those really go together in terms of the analysis.
“So we consulted widely, the industry itself and then ZIDA in terms of those who spend time trying to attract investment and then what we saw that this beneficiation tax was found to be punitive, it was discouraging investment and therefore it had to go.
“We then argued as Government to say no, we cannot just remove this then we need some compensation elsewhere. We then proposed that we want to raise the royalty. So that again we workshopped with the industry.
“In addition to that, I invited the IMF, the Fiscal Affairs Department in Washington to do an analysis of the fiscal regime for our mining sector and lo and behold, they came up with a similar proposal which is; suspend this beneficiation tax but then increase the royalty.
“Initially they had a high figure, so we ended up settling on a royalty of 5%. So if we could rise together, I think we have made progress. On the royalty, we will be getting those resources for sure, but on a beneficiation tax you only get that from selected mines that have not complied by the royalty, it is a sure thing. Of course, we could argue about the level of the royalty.”
In an interview with Nehanda Radio, analyst Pride Mkono said the decision by Ncube to impose a tax holiday on platinum companies showed that he was “Minister of the rich”.
He further labeled his decision as dubious and scandalous.
“Mthuli Ncube is Finance Minister of the rich and not for many Zimbabweans. His decision not to tax platinum companies that are exporting raw platinum shows that he wants to enrich corporates and the elites.
“It is shameful because these companies are supposed to carry their share of taxes for the state to have resources to cover social services like health and education,” he said.
“But more importantly, it is about where this platinum is being mined. The communities surrounding these mines are extremely poor and underdeveloped. So it is a scam and a scandal to put platinum companies on tax holidays.”
Dzivarasekwa MP Edwin Mushoriwa also urged the Minister to reconsider his decision.
“Hon. Chair, we have got a challenge as we alluded to during the Second Reading. This clause to suspend the collection of tax on exportation of unbeneficiated platinum, we do not believe and I think the Hon. Minister is aware.
“In 2019, we had the same clause in his Finance Bill and we were told that the platinum miners were going to come up with a refinery of platinum by 2021.
“We do not want to believe that we should continue to allow these miners and I think Hon. Members, well pertaining to how much these platinum mining companies are actually switching and taking advantage of Zimbabweans. We cannot therefore allow a question that will suspend the operations or the collection of tax on exported raw platinum,” he said.
MPs also successfully argued for the deletion of a clause in the Finance Bill which would have imposed a 2-year jail sentence for failure to pay Value-Added Tax (VAT).
The legislators argued that tax payment should remain a largely civil rather than criminal matter. Finance minister Mthuli Ncube changed stance and concurred that the 2-year sentence be deleted.