Rwanda Expects to Double Revenue From Mining Industry on Tax

Rwanda’s government will almost double revenue from mining next fiscal year after the introduction of new taxes, said Evode Imena, the state minister in charge of the industry.

Income will grow to 10.3 billion francs ($16 million) in the 12 months through June 2014 from 5.46 billion francs a year earlier, Imena said in an interview on June 25 in the capital, Kigali. Finance Minister Claver Gatete on this month introduced a 4 percent royalty tax on the value of basic metals mined and a 6 percent levy on precious metals and gems.

The tax “will make a significant increment in the share of direct and indirect taxes generated from the mining sector,” Imena said.

Rwanda is the world’s fourth-biggest producer of tantalum, a metal used in mobile phones and video-game consoles, accounting for about 12 percent of global production last year, according to the U.S. Geological Survey. The East African nation also produces tin, tungsten and gold, while companies including Simba Gold Corp. and Desert Gold Ventures Inc., both based in Vancouver, operate in the country, according to the agency’s website.

Rwanda’s mining industry is expected to generate $190 million of revenue this year, compared with $136.6 million in 2012, Inema said. That figure may more than double to $409 million by 2017, Prime Minister Pierre Damien Habumuremyi said in March.

Low Taxes

The level of taxes in the industry are “still low compared to the income generated by the sector,” Inema said. “This is due to the complexity of taxation of the mining industry, a number of investment incentives provided to the investors, which include exemption of import duties on machinery and others.”

The Mining Association of Rwanda, an industry body based in Kigali, said it had disagreed with the Finance Ministry about the introduction of the tax in talks that took place before it was announced.

“We had discussions with the Ministry of Finance and stakeholders before the law was adopted, but nothing changed,” Jean-Malic Kalima, president of the association, said in a phone interview. “The industry players and lawmakers still believe the increase of 4 percent and 6 percent is a huge increase.”

Mining is Rwanda’s second-biggest foreign-exchange earner, after tourism, according to the Rwanda Development Board’s website. The country’s economy is forecast to grow 7.5 percent this year compared with 8.2 percent in 2012, according to the International Monetary Fund.

Rwanda is expected to introduce an online cadastre system to manage its mineral licenses in August, according to Spatial Dimensions. The system will allow investors to apply for mining permits in a transparent process, Charles Young, a senior consultant at the Cape Town-based company that developed it, said in phone interview today. The project will also include the development and implementation of a license web portal, he said.

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