Harare — Finance Minister Tendai Biti has lashed out at the mining sector for failing to contribute meaningfully to the fiscus, despite making huge profits and exploiting natural resources.

Presenting his 2010 National Budget in Parliament last Wednesday, Minister Biti said the contribution of the mining sector to the fiscus was minimal compared to other countries in the region.

The mining sector is only contributing a paltry four percent in royalties and corporate tax.

For the nation to benefit from the exploitation of these non-renewable natural resources, the minister proposed to increase the rate of royalties on precious metals from the current 3 percent to 3,5 percent.

Currently, royalties on precious metals are levied at a rate of three percent of the gross market value.

During the year, the international price of gold increased from an average of US$800 per ounce in November 2008 to about US$1 280 in November 2009, while the price of platinum moved from US$870 per ounce to about US$1 450 per ounce during the same period.

However -- the mining sector could not increase its contribution to the fiscus prompting the minister to say that mining houses are understating their financial figures.

"The behaviour by mining houses is not acceptable and it should not continue like this," Minister Biti said.

He said the current mining tax regime is highly preferential in recognition of the capital outlay related to the sector. In line with Government's call to encourage utilisation of mining claims, Minister Biti proposed to spread taxable income over a period of four years.

This policy measure will result in income earned from the sale of mining claims being taxed in the year of disposal.

"Mining claims are being held onto for too long without being exploited, hence the need to enforce the "use it or lose it" principle through periodic review of mining claim fees.

"In order to discourage holders of mining claims from retaining un-worked ground for speculative purposes, I propose to introduce a fee of US$100 per hectare per annum on un-worked claims," he said.

Minister Biti also revealed that under the new measures, a prospector could now apply for an Exclusive Prospecting Order over an exclusive prospecting reservation.

He said the EPO might be for a maximum of 65 000 hectares, for an initial period of three years and one extension period of three years.

The current legislation does not require compulsory relinquishment of a portion of claims or EPO reservations after a specified period of time.

A higher scale of fees is expected to encourage the relinquishment of more areas for new applicants.

Following consultations with the Ministry of Mines and Mining Development a proposal was made to reduce the maximum size that may be granted for an EPO from 65 000 to 20 000 hectares.

However - the minister said there would be exceptions for minerals that require huge hectarage, such as methane gas. He further proposed to peg application and renewal fees for EPO and special grants at US$100 000.