Miners get the hump with big taxes

Miners in Vietnam are facing steep hikes in royalties despite petitions to keep taxes on an even keel. According to the Ministry of Finance’s (MoF) latest proposal, royalties on most metallic minerals such as wolfram, nickel, silver, iron and mangan would rise from 7 to 10 per cent.

Noticeably, gold will be subject to the highest rate of 12 per cent, from 9 per cent currently. Besides, the royalty tax for most of non-metallic minerals such as granite, coal, ruby, sapphire, mica, dolomite and quartzite will increase by 1-4 per cent, while the rate for oil and gas will remain unchanged, 6-27 per cent for crude oil and 1-10 per cent for coal and natural gas.

The MoF’s proposed rates based on the Royalties Tax Law, which was approved by the National Assembly on November 25, 2009 and will take effect from July 1, 2010.

The MoF Minister Vu Van Ninh said that with the current tax rate, the collected state budget from 2005-2008 had reached $1.2 billion per year, accounting for 15 per cent of the total collected budget, of which 95.5 per cent had come from royalties on oil and gas and other resources.

“The new tax rate will raise the state budget from the royalties of other natural resources from $56.2 million to $181.6 million, because the tax rate for oil and gas has not been adjusted,” Ninh said. However, mining investors believed that a royalty increase would make it difficult for Vietnam’s mining industry to call for investment funds.

Nguyen Ngoc Quynh, general director of Bong Mieu Gold Mining Company Limited, said rising royalty tax had caused difficulties for the company. He said when the company received its investment licence in 2003, royalties applied on its products were only 3 per cent, but the rate kept climbing, and now it could reach 12 per cent.

“The high tax rate may cause miners to not exploit minerals in some poorer mines, as the cost will be higher than what they can earn, thus leading to a waste of the country’s resources. Meanwhile, it may also encourage illegal exploration,” Quynh said.

The Bong Mieu Gold Mining Company started commercial production in the fourth quarter of 2006. It is 80 per cent owned by Bong Mieu Holdings Ltd, a wholly-owned subsidiary of Canada’s Olympus Pacific Minerals, Inc. Local owners at 10 per cent each are the Mineral Development Company and the Quang Nam Mineral Industrial.

Nguyen Xuan Tuong, general director of Phuoc Son Gold Mining, shared a similar concern. “Meanwhile, the tax rate of 3 per cent was calculated on different levels between sales prices and costs and the 12 per cent figure was only based on sales prices. Therefore, the tax rate would rise by 6-8 per cent, not only by 4 per cent,” said Tuong.

“Mines with different quality should be subject to different tax levels,” Tuong added. Phuoc Son Gold Mining, the second joint venture company of Olympus Pacific Minerals Inc, with the Quang Nam Mineral Joint Stock Company (Minco) which was built in 2003 in Quang Nam province, is located 74km from the Bong Mieu site.

Robert Guest, a representative of the Vietnam Business Forum’s Mining Working Group, said that no country could get close to putting the royalty tax on gold at 12 per cent. “The most I can think of might be 10 per cent, which is still above the average. However, it’s up to the government. If they don’t mind, they can get some money now, but they will not get new investments, and some mines will close.

“We are hoping the government will understand our position and give us some relief from these taxes,” he told VIR.

VietNamNet/VIR

Tags: Vietnam mining