Acting PM says zero duty on Bauxite brings long term benefits.

ACTING Prime Minister Hon Manasseh Maelanga yesterday said cabinet’s decision to apply zero duty on its bauxite exports would have long term positive implications on the economy.

Cabinet made the decision in November last year following a joint submission by the Prime Minister, Minister of Mines, Energy and Rural Electrification, and the Minister of Finance.

Hon Maelanga explained that the cabinet’s rationale for approving the joint submission was based on harmonising efforts that would lead to success in the country’s development aspirations without compromising current legislations.

The Acting Prime Minister noted that last year, the Mines and Minerals Board (MMB) issued mining licences to investors who wished to mine bauxite in the country, particularly, on Rennell Island.

However, he said. “A 20 [percent] export duty penalty was imposed on Bing Tang (BT) Mega Borneo, in 2015, which if applied to reputable companies not only is excessively high, but also inconsistent with global standards and a detriment to investments into our national economy.”

Moreover, he said, “following concerns raised by investors to review this unfavourable rate, the government agreed to take the matter for cabinet’s consideration despite the fact that under Section 7 of the Customs and Excise Act [cap 121] the Minister of Finance has the power to impose export duties on any goods whatsoever without having to take the matter to Cabinet.

“As per the concerned operation, the output tax, namely; export duty and royalties, are a burden to investors as these costs ought to be paid even before the company realises any profits from their operation”.

Under the Income Tax (Amendment) Act 2014, provision for carried forward losses being claimed by mining operations is permitted for a period of seven years while other entities are limited to five years (Section 6).

This highlights the extensive costs involved in establishing and carrying out mining operations and the Acting Prime Minister warned that setting the export duty rates at 20 percent while obviously good for the Government to receive an early flow of revenue, such a very high rate would prevent any genuine investments in the mining sector.

Cabinet recognised during its deliberations on the matter last year that imposing a high export duty rate in comparison to global standards will discourage genuine investors particularly in addition to the current hefty tax being imposed on bauxite mining operations.

Further Hon Maelanga said export duty for bauxite mineral according to an International Monetary Fund (IMF) report is zero percent which is convergent with the draft National Mineral Policy currently in circulation for public discussion, adding that an evaluation of export duty for the top 10 Bauxite producing countries in the world, showed that the highest imposed export duty is from Malaysia, rated at 5 percent, while the rest sit on zero percent.

The Acting Prime Minister explained that the 20 percent export duty rate imposed for bauxite exported an illegally harvested stockpile on Rennell was originally prescribed as a penal duty, but adjustments had to be made in light of the international market price to rectify the inconsistency, which certainly would have placed the operators in an uncompetitive environment and therefore been unconducive to legitimate mining operations.

He says Cabinet’s decision on the matter was premised on the understanding that the application of output tax such as royalties and export duty can be detrimental to the viability of mining projects if rates are set too high and thus the development of the mining sector would require Government to make decisions which are costly in the short term but profitable in the long-term.

Also Hon Maelanga added that permission to allow bauxite mining on Rennell was made by the Landowners and the Provincial Government in accordance with legal and regulatory requirements, before Mining Leases were granted by the National Government.

The Acting Prime Minister then pointed out the significance of working out an acceptable export rate as it is a reflection of our industry standards and our national interest in the way it stimulates growth and its impact on land-owners, government, investors and the wider community.

“All policy, regulatory, social and legal aspects were comprehensively addressed before the decision was collectively made by Cabinet endorsing the Minister of Finance to zero rate the export duty for bauxite,” said Hon Maelanga.

The statement also added that although a proactive and robust democracy that expresses the views and concerns of the public is a welcome sign, the Acting Prime Minister cautioned political opponents to stop conspiring with both domestic and international sources to use the current media debate on zero duty for bauxite exports to sow the seeds of political instability against the common good.

“Whether it be the Prime Minister or a Cabinet Minister there is no reason why the relevant Leaders, Officials or representatives of our various institutions cannot be approached for clarification on issues of public concern rather than making unjustified calls that are without factual basis,” said the Acting Prime Minister.

–OPMC PRESS