MAC: Mines and Communities

Namibia's Chamber of mines denies tax evasion

Published by MAC on 2019-05-10
Source: The Namibian

Following allegations by Namibia's national English-language newspaper that mining companies were "tax moonlighting" - due to administrative failures by the authorities -  the country's Chamber of Mines has counter-attacked  [see story: Dozens of Namibian miners guilty of tax evasion ]

It states - among other things - that these claims "...could lead to the unnecessary introduction of taxes and policies which could damage the industry more".

Namibia: Chamber Denies Mines Tax Honeymoon

By Lazarus Amukeshe

The Namibian

9 May 2019

THE Chamber of Mines has urged the finance ministry to review the financials of each Namibian mine to see if they have violated or abused any tax rules.

The chamber made the call yesterday in reaction to a story published by The Namibian last month.

The article focused on the fact that mines in the country sold minerals valued at N$85 billion, but only paid about N$1 billion in corporate tax between 2012 and 2017. Conversely, Namdeb Holdings, who made N$61 billion in sales, alone paid N$10 billion as corporate tax over the same period.

The N$1 billion tax paid means the mines purportedly only made a taxable profit of N$3 billion over the five years.

The data was extracted from information provided by the chamber on the performance of the mining industry over the years.

In the statement, the chamber said the finance ministry and the Receiver of Revenue should review each mine's finances to dispel such harmful rumours once and for all.

The Namibian reported that mining companies do not only pay corporate tax, but other taxes too at varying rates.

Corporate tax is defined as tax levied on the profits made by companies and individuals.

This profit is the residue from sales revenue after deducting expenses that companies incurred and any accumulated assessed tax losses.

The chamber has, however, countered the article in The Namibian, saying it contained "gross contextual and factual misrepresentations".

Among the issues that seem to have irked the chamber was the fact that The Namibian mentioned the sales revenue earned and the tax paid. This, according to the chamber, was incorrect.

"It is neither accurate nor appropriate to compare the amount of corporate tax paid by mining companies with the gross earnings or revenue. Corporate tax is paid on net taxable profits. Any comparison of revenue with corporate tax paid is bound to be misleading," the statement read.

The chamber added that given the capital-intensive nature of mining, and more importantly the differing levels of maturity and profitability of mining companies that affect the ability for mines to pay tax, many companies have not yet reached profitable levels.

The article had also mentioned that some companies were not profitable, and the finance ministry had said that some mines were engaging in tax reducing schemes as well.

The chamber furthermore stated that The Namibian accused major mining companies of engaging in dishonest and devious practices.

"To effectively state that the large mining companies are being devious and outrightly dishonest is grossly ignorant, misinformed and irresponsible, given the damage that this type of statement could cause. Large mining companies strictly abide by all national and international taxation regulations," the chamber argued.

A number of companies which operate in Namibia have clashed with tax authorities and tax justice groups in other countries before.

Some have shell companies in well-established tax havens, and have sold stakes in the mines offshore to avoid paying tax in Namibia. The chamber did not address this in their reaction.

According to the chamber, it was not correct to focus on corporate tax alone, but to look at the mining sector's real impact on the Namibian economy.

"According to chamber statistics, on average, 20% of the revenue and well over 50% of the profits generated by the mining sector is paid over to the government's coffers," the press release read.

The chamber added that the statement of facts on the corporate taxes paid by the mines was damaging, and could lead to the unnecessary introduction of taxes and policies which could damage the industry more.

The finance minister, Calle Schlettwein has however in 2019 budget said his ministry would not by any means introduce taxes that would harm the economy.

The Namibian has reported on countless times the contribution the mining industry had on the overall economy, and did not downplay its importance by not mentioning it directly in the disputed article.


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