Monday, November 29, 1999

MinesMin suggests I-T type slabs for levy of windfall tax

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Intensifying its pitch for imposing a Windfall Tax to curb profiteering among the mining community, the union Mines Ministry has suggested to the Finance Ministry a slab system of taxation similar to the Income Tax to net the surplus profits earned by merchant miners.The intensified pitch for a windfall tax comes close on the heels of Australian Premier Kevin Rudd recently announcing his government's determination to impose a Resource Rent Tax, which is also understandably aimed at curbing the profiteering of Aussie mining behemoths like Rio Tinto, BHP Billiton, etc. Mines Minister B K Handique in a recent letter to Finance Minister Pranab Mukherjee aired his concern over the "profiteering" by the merchant miners and cited that during 2003-04 to 2009-10, iron ore prices have risen by about 170 per cent powered by demand from neighbouring China."We have told the Finance Ministry that while ore prices continue to surge, its cost of production hasn't changed much. So, iron ore mining remains highly attractive for the miner. It is also a fact that higher returns have not translated into higher spends on CSR for local communities. What's more, it has fuelled a rapid growth in ore production along with corresponding increases in boundary disputes, acrimonious litigation, misuse of transport permits of illegally mined minerals and recently in mafia activities," Handique told The Indian Express.The Mines Ministry suggested to the Finance Ministry that one key way to impose the Windfall Tax was "imposing a slab system like the Income Tax, whereby the miner is taxed on customs duty, apart form royalty on the sale price of iron ore in the invoice of the final purchaser for domestic sales and Freight On Board (FOB) in case of exports on a slab system, with a provision for standard deduction." For example if the FOB was 62 dollars, then apart from the 10 per cent royalty on the average value, the miner would also have to shell out customs duty calculated on a graded basis as against 5 per cent duty on a flat basis."Another mechanism could be to identify a threshold value, a fixed value taken as a percentage of the average prices published by the Indian Bureau of Mines (IBM) and any value realized by the miner over and above such a threshold value would be levied at a higher rate. Handique cited that in case of ore grade of 65 Fe and above lumps, the average price published by the IBM was Rs 2,826 per tonne for Chhattisgarh and if it is assumed that 50 per cent per cent was the threshold value for such mineral, then any value realized by the miner above Rs 1,413 would be charged at a higher royalty rate," the ministry said.Fearful of the new tax, the mining community has opposed it. "If this proposal is accepted and implemented, it will ultimately lead to a situation where only legal miners will pay the so-called 'windfall tax'. Despite your good intentions, in the course of time, it will be the illegal miners who will rule the roost and defeat the very purpose which you have in mind," Federation of Indian Mineral Industries secretary general R K Sharma said in a letter to Handique.

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