Cabinet approved to amend Section 114 of the 1992 law "to make the payment of royalties to the state by mining companies mandatory", stated the latest Cabinet briefing paper released on Friday.

"Royalties constitute a major contribution to State finances and without it an alternative source of income will have to be found to fund several economic development challenges facing Namibia," the paper noted.

While corporate tax in Namibia stands at 35 per cent, mining companies have been paying 37,5 per cent since 2000 and diamond mining companies pay royalties to the Government.

Section 114 of the Minerals Act allows the Minister of Mines and Energy (MME) to impose royalties on non-diamond mining sectors, but only on a case by case basis, when it is established that a mining company sells its output via transfer pricing or below market value.

The MME introduced such a 5% mining royalty tax on all non-diamond mining activities at the end of 2004, but modified it downwards in 2006 after consultations with the Chamber of Mines and individual companies.

According to the 2007 annual report of the Chamber of Mines, issued in April this year, most members of the Chamber have agreed to pay the royalty, "some members have taken the view that the legal preconditions for imposing the royalty contained in the 1992 Act have not been met".

The Ministry has now reviewed the mining law and an according amendment will be tabled soon in Parliament.

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