Congo’s finance ministry has provisionally reinstated mining companies’ exemption from a value added tax on imports, the Chamber of Mines said on Wednesday, days after miners complained customs authorities were planning to impose VAT on them.
Democratic Republic of Congo, Africa’s top copper producer, agreed to suspend the tax in July 2016 to help companies during a commodity price downturn and to pay down hundreds of millions of dollars in VAT reimbursements owed to the companies.
“The suspension of TVA for mining companies was decided by the minister (of finance) last Saturday,” John Nkono, secretary general of the industry-led Chamber of Mines, told Reuters.
“Although provisional, this needed to be taken. Otherwise, the situation would have been catastrophic,” he said.
A spokesman at the finance ministry did not immediately respond to a request for comment.
The one-year exemption lapsed last month and the Chamber of Mines said at the weekend VAT had begun showing up in customs fees last week.
Nkono said Finance Minister Henri Yav had since instructed customs officials to again suspend collection of VAT until contradictory language in this year’s budget law related to the tax could be clarified.
Major mining companies in Congo include Glencore, Randgold Resources and China Molybdenum and the country’s Chamber of Commerce had said their operations would be adversely affected by the reinstatement of the VAT.
The government owes mining companies about $700 million in VAT reimbursements from before last year’s suspension, according to the Chamber of Mines.
But the government is short of cash and desperate to increase tax revenue in the face of an economic crisis. Inflation is set to hit nearly 50 percent this year. The central bank has only about three weeks left of import cover.
Economic problems in Congo, which also produces significant amounts of gold, tin and cobalt, have been exacerbated by unrest across the country caused by President Joseph Kabila’s failure to step down when his mandate expired last December.
Reporting By Patient Ligodi; Writing and additional reporting by Aaron Ross; Editing by Tim Cocks, Pritha Sarkar and Janet Lawrence