Government to Raise coal tax

Mozambique is close to finalising a new fiscal regime for its mining and petroleum sectors and may raise royalty taxes for coal, its key export commodity, the deputy mines minister said recently.

“We are in discussions, so we don’t know what will happen but probably we will change some of them,” Abdul Razak Noormahomed told Reuters on the sidelines of the Investing in African Mining Indaba in Cape Town.

Probably coal can be a little bit higher, but we will see. It is going to be submitted this year and likely implemented by the end of this year,” he added.

Currently, royalty taxes for coal stand at 3%, lower than the 5% for base metals and 10% for diamonds.

Noormahomed said Mozambique planned a flat rate of 32% capital gains tax on transactions in the mining and energy sectors for 2014, aiming to strengthen the existing regime where tax gathered sometimes undershoots 32%.

The main tax incentives for mining companies are five-year exemptions for value-added tax and import duties for equipment and materials.

The new fiscal regime review formed part of a broader regulatory overhaul in Mozambique, with amended mining laws also expected to be passed this year.

The Southern African nation, which exported its first coal overseas in 2012 after two decades, has the world’s fourth-largest untapped reserves of coal, estimated at two-billion tonnes.

However, a lack of infrastructure and rail capacity, as well as security threats, had hampered coal exports for Brazilian miner Vale and Rio Tinto, with the London-headquartered company recently taking a $3-billion write-down from its Mozambique coal operations.

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