Mining firms object to increasing royalty tax
Mining firms object to increasing royalty tax
A number of mining firms have raised objections against the Ministry of Finance’s recent proposal to increase taxes on key natural resources.
Nguyen Van Thang, deputy chairman of Nui Phao Mining Processing and Exploiting Limited Company, said at a meeting last week that raising the royalty tax would not help the country increase its state budget, but encourage illegal mining activities.
Thang made the comment after the Ministry of Finance (MoF) introduced a draft circular on the royalty tax hike in May 2015 to collect comments from ministries, agencies, and businesses.
As per its calculation, tariffs on some metallic and non-metallic minerals should be adjusted up; for instance, iron from 12 per cent to 15 per cent, titanium from 16 per cent to 18 per cent, and gold from 15 per cent to 20 per cent. Others like coal, sand and granite will be subject to tax increases of 3 percentage points, while taxes on precious stones such as diamond, ruby, and sapphire will be increased by 5 percentage points.
Thang said to VIR, “It is unreasonable for the MoF to say in the proposal that the move aims to help cover the loss of the mineral export tax, which will be removed in line with some free trade agreements (FTAs) that the country is joining.”
“It is too early to increase the tax, as these FTAs have not been signed yet. Moreover, the country is also applying some technical barriers to reduce or ban the export of some minerals,” he added, noting that an additional insignificant collection from the tax hike could not help the country cover possible serious consequences in the long term.
Not only Nui Phao Mining, but also many other domestic and foreign firms, including Canada’s gold mining company Besra, have complained that Vietnam’s seven increases on taxes and fees in the extractive industry since 2007 have caused more difficulties for them. Changeable policies have discouraged mining companies from investing in modern assemblies, but focused on small-scale production and raw material sales, Thang attributed.
“Tax hikes have adversely affected our revenue and profit target for the Nui Phao wolfram project, the largest mineral project in Vietnam, and considered the world’s largest wolfram mine outside China,” he stated, without offering any detailed figures.
Besra CEO John Seton also said: “Any increase, however small, would seriously impact Besra’s ability to commit further investment capital in Vietnam.”
At last week’s meeting, mining firms proposed that the government and the National Assembly Standing Committee reconsider tax hikes on minerals in a more careful and thorough manner before making any decisions, The MoF planned to present the proposal to the committee’s session in September this year. The new rates will be applicable from January 1, 2016 if they are approved.
