The Democratic Republic of Congo suspended its value-added tax on imports by mining companies after briefly reinstating it.
The Democratic Republic of Congo (DRC) suspended a value-added tax (VAT) on imports by mining companies after briefly reinstating it, the country’s Chamber of Mines said on Thursday (August 17).
In July 2016, the government decided to suspend the VAT on imports for one year to protect the Congolese franc from low metals prices. After the decree expired last month, customs authorities resumed charging the tax, hurting mining companies in the country.
At the time, miners said they saw the tax as part of a deteriorating business climate in the unstable country. The DRC is Africa’s top producer of copper.
Some government officials agreed. Earlier this month, Albert Yuma, president of the DRC’s Chamber of Commerce, said reinstating the VAT would “make the functioning of mining companies more difficult.” He added that companies “need the help of the Government of the Democratic Republic of Congo during this constraining period.”
Henri Yav Mulang, the country’s finance minister, “resolved the problem” by suspending the VAT once again. “The finance minister has given an instruction to the DGDA to not collect VAT on imports by mining companies,” Kimona Bononge, managing director of the Federation des Entreprises du Congo, told Bloomberg.
Aside from protecting the country’s currency, the government initially suspended the tax on imports to address the $700-million VAT reimbursement it owes to mining companies.
Copper miners operating in the country include major miner Glencore (LSE:GLEN), China Minmetals MMG (HKEX:1208), Tiger Resources (ASX:TGS) and Ivanhoe Mines (TSX:IVN).
In addition to being a key copper producer, the DRC is the largest cobalt-producing country, accounting for roughly 60 percent of the world’s output. Both copper and cobalt demand are set to surge in the coming years, as they are key elements needed in electric car batteries.
On Thursday, three-month copper on the LME closed down 0.6 percent, at $6,490 a tonne, after advancing to $6,580, its highest point in more than two years. Copper, which rose 2.4 percent on Wednesday (August 18), is up about 18 percent so far this year.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.