Namdeb tax relief bid shot down
Windhoek – Namibia’s Finance Minister, Saara Kuugongelwa-Amadhila, has said the government would not reduce Namdeb Diamond Corp’s tax rate to 37.5 percent from 55 percent after the company said it is pushing for a review of the diamond fiscal regime.
Namdeb, famed for its high quality marine gems, is seeking a “possible review of the overall diamond mining fiscal regime”, spokesperson, Pauline Thomas, has said. But the government says that it made a “conscious decision” to set the diamonds tax rate at 55 percent and would not entertain Namdeb’s suggestions of a reduction in the tax rate, Kuugongelwa-Amadhila said in an interview.
“We can’t entertain an idea that diamonds should be taxed at the same rate as other mining companies. Absolutely not! We made a conscious decision to set the tax rate at 55 percent because those diamonds are highly valuable and Namibians should share in the benefits,” Kuugongelwa-Amadhila said. Namdeb, equally owned by Anglo American Plc and the Namibian government, wants its tax reduced to the same level as other mining companies.
Thomas said that Namibia’s tax rate on diamonds mining is one of the highest in the world and it has not been changed in years.
“It is common knowledge that the Namibian diamond mining fiscal regime is one of the highest in the world and goes beyond the tax rate of 55 percent on profits, as it also includes a royalty of 10 percent on turnover,” Thomas said. “This fiscal regime has been unchanged for many years,” the Namdeb spokesperson added.
Namdeb argues that should the Namibian government reduce its tax rate, it would give it leeway to raise capital and invest in extending the lifespan of its existing operations. The company has also embarked on a push to tap into marine diamonds, but says it is yet to secure the technology to mine the diamonds located in the depths of the Atlantic Ocean.
“The nature of diamond mining in Namibia has evolved and the challenge of extending the life of an ageing mine is compounded by the fact that the technology to explore in these new areas (marine), is not fully developed,” she said.
Namdeb said on July 16, 2013, that it intends to exploit diamonds in mid-water and shallow water marine areas to extend its operations beyond 2020. Then the company said that the technology required to mine these marine areas is still being developed.
“In light of this, Namdeb has identified an opportunity to engage government in a possible review of the overall diamond mining fiscal regime. Namdeb has had various insightful engagements with government on this issue and these engagements are on-going,” she added
“Namdeb is well aware of the important balancing task that government has in setting the appropriate tax levels, while maintaining an attractive environment for investment. As one of the leading corporates in Namibia, we play our part in dialogue with government to provide the necessary factual information to enable government to find the right balance,” Thomas said. Kuugongelwa-Amadhila said the benefits from diamond mining should trickle down to ordinary Namibians.
Namdeb produced 1.67 million carats of gemstones in 2012, of which 1.1 million carats were mined by the Debmarine Namibia division in the southwest African country’s Atlantic waters. The waters are home to an estimated 80 million carats, the richest known marine diamond deposits in the world, according to the company’s website.
“There is not going to be a review of the tax rate for diamonds, we are not going to do that. Namibians should share in the benefits of diamonds mining,” Kuugongelwa-Amadhila said. “As government we are not going to perpetuate a situation which encourages the continued skewed distribution of resources in favour of corporate. “The resources of this country have to alleviate poverty in the country and we are doing our best to ensure that resources are not shared in favour of a few corporates,” Kuugongelwa-Amadhila said. In August 2011, the Namibian government backed down on plans to raise corporate tax rate on mining companies to 44 percent from 37.5 percent.