Last month, President Arthur Peter Mutharika opened the 2016/2017 Budget Meeting of Parliament on 20 May 2016 with the speech “Towards Recovery and Sustainable Socio-Economic Development” and one week later, Hon. Goodall Gondwe, Minister of Finance, Economic Planning and Development delivered the 2016/2017 Budget Statement.
Goodall indicated that
in the Natural Resources, Energy and Mining sector, the total development budget allocation is MK13.1 billion. This will almost entirely come from donors, and will be provided for the Energy Sector Support Project and the Mining Governance and Growth Support Project.
A welcome development is that the Mining Fiscal Regime Bill will be presented to the house; it remains unclear though if the Mines and Minerals Bill will be tabled,
98. A third income tax measure, Mr. Speaker, Sir, relates to mining. Honourable Members may wish to know that, as a country, we have a mining fiscal regime that was enacted at the time of independence, hence one that is out of tune with current national and international developments in the mining sector. To address this problem, I shall be presenting to this House, Mr. Speaker, Sir, a bill that aims at providing clarity in the determination of taxable income, incentives and proposals to transfer the administration and collection of royalty from the Ministry of Mines to the Malawi Revenue Authority.
99. Further, the mining fiscal regime bill will also separate provisions for the taxation of mining projects even if the projects are owned by the same company, so that each project should pay its fair share of tax. To bring transparency in the tax incentives provisions that are granted to mining investors and to ensure equal and fair treatment, the fiscal regime for the mining sector will grant tax incentives to qualifying investors. The House may wish to note that the fiscal regime lays bare all tax incentives, details for claiming depreciation allowances, and determination of assessable income, thereby promoting transparency and accountability.
Beyond the income tax measures, the Minister also introduced the following Value Added Tax measures.
84. Mr. Speaker, Sir, one of the areas that is gaining prominence in Malawi is the mining sector, as evidenced from the growing exploration appetite and the increase in the number of exclusive prospecting licenses awarded to date.Currently the VAT rules and regulations do not allow a person who is engaged in mining exploration to be registered for VAT. A person is eligible for VAT registration only when he has begun to supply taxable goods or services.
85. Mr. Speaker, Sir, as you are aware, it takes time for a mine to be operational and during exploration 64 phase, a miner (prospector) will have incurred VAT which he is not able to claim because he is not registered for VAT. To address this problem, which has acted as a disincentive for investors, we propose amending the VAT Act to allow the mineral exploration phase to be eligible for VAT registration and, therefore, qualify for VAT claims. This measure will not only relieve a VAT cash flow burden on miners, but will also act as an incentive in the mining sector and this is likely to spur the mining industry to greater heights.
The President in his State of the Nation address explained current mining developments.
Mr. Speaker, Sir, Malawi’s unique mineral potential continues to attract interest from both local and foreign investors. We are now focusing on creating an appropriate investment environment by reviewing of mining legislation and establishment of mining cadaster, among other things. I am pleased to report that Government finally launched the countrywide airborne geophysical data in August, 2015.
Mr. Speaker, Sir, Government will continue to collect, assess and disseminate geo-scientific data related to geology and mineral resources of Malawi. Clients can now access the data for use in mineral exploration, infrastructure development and general research.