LANDOWERS will receive increase royalty from mining companies operating on their land under amendments being made to the Mines and Minerals Act.
The Mines and Minerals (Amendment) Bill 2014 is now before parliament.
Minister for Mines and Minerals, Moses Garu, said the mining industry is an important integral part of development for inclusive economic growth in Solomon Islands.
“But to realise this, certain reforms have to take their courses in a more strategic and proactive manner to trigger and catalyse growth,” Mr Garu said.
Reforms will include increase in royalty rates with shares of 50 percent to the National Government; Landowners or Landowning Groups 40 percent; and the provincial government 10 percent.
“This is to be clarified on how the market value of various minerals is to be determined,” Mr Garu said.
“All funds to be included in the consolidated revenue of the government before they are paid to a special account at CBSI for distribution to landowners or landowning groups and the relevant provincial government,” he added.
“Mining companies to build approved infrastructure as a term prior to granting lease as requirement.
“Where a mining project is an undersea mining operation and there are no landowners or landowning groups, proportion of royalties that would usually be received in trust to be passed through to landowners and the relevant provincial government will be included as Consolidated Revenue of the Government of Solomon Islands.
“We are of the view that the adoption of these reforms through these amendments should remove the current processes that negotiate fiscal deals on a one-on-one basis with mining companies to a more robust process.
“The current process in our view is time consuming and can create uncertainty both for the Government and the mining companies in terms of the confidence and investment in this industry,” Mr Garu said.
He highlighted amendments to the Act as a provision to build business confidence to mining investors.
“The objective of this amendment is to provide business confidence and certainty to prospective investors as they consider the level of their investments and business proposals in our mining sector.”
Mr Garu explained that major components of the amendment are requirements whereby the construction of approved infrastructure by a mining company is a term for granting a mining lease and the mining company in return will claim a tax credit on the amount spent in constructing of approved infrastructure.
“Treatment and details of the tax credit to be reflected in the Income Tax (Amendment) Bill to be present before parliament by the Minister for Finance.
“The designed arrangement is to ensure participants or operators in the mining sector build and contribute to community infrastructures where appropriate.”
The minister added the amendment also sets the royalty rate of the most precious metals in legislation. These metals are gold, silver, copper, nickel, bauxite, and iron ore.
“Proposed royalty rate be fixed at three per cent, with proportions received in trust to be passed through to landowners and the relevant Provincial Government.
“This amendment will repeal the discretionary power whereby the applicable royalty rate is set by Ministerial Order by the Minister of Mines in consultation with the Minister of Finance,” he said
He said fixing royalty rate in the legislation rather than by Ministerial Order draws a clearer picture to investors of their expected financial obligations as well as provides certainty to investors that are currently considering mining operations in Solomon Islands.
“Under the current arrangement, the royalty and export duty rate determined has been assessed at 1.5 percent.
“And the royalty is exclusively shared with the landowners at 1.2 per cent and the provincial government at 0.3 percent, and the export duty is paid to the National Government.
“With the tax base for these fiscal charges is the same; this can then be also expressed as a royalty rate of 3 percent, with revenue sharing according to the following percentages: National Government 50 percent; Landowners or Landowning Groups 40 percent; and the provincial government 10 percent.”
Mr Garu added the amendment bill also clarifies how the market value of various minerals is to be determined.
“This clarity will remove any uncertainty concerning the value of minerals, and therefore verifies and confirms the appropriate amount of royalty payable by mining companies.”
By BRADFORD THEONOMI