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Levy royalty on sand mining and stone quarrying, advises Auditor General

The Auditor General is proposing that the government starts taxing the commercial excavation of sand and rocks.

The Auditor General’s proposals are contained in his value for money audit report to Parliament for the period ending December 2015. The report covers eleven sectors, including mining, oil and gas.

The report observes that government is losing a lot of money due to unregulated commercial mining of sand, marram and stone quarrying, among others.

“Failure to levy royalty on these commercialized building materials was due to Department of Geological Survey and Mines’ (DGSM) interpretation of the exclusion of building materials in the Mining Act without making an assessment as to whether they were mined by the individual for their respective domestic use or used for commercial purposes,” the report reads in part.

The report then recommends that DGSM levies a loyalty on commercial sand mining and stone quarrying. Mineral royalty is a payment to government as consideration for the extraction of minerals.

The Auditor General’s recommendations come at a time when government is in the process of amending the Mining Act, 2003. One of the issues in the amendment is how to bring commercial exploitation of the so-called low value minerals like sand, stone or rock and clay, among others, to be defined as minerals by law.

In the report, the Auditor General explains that he conducted interviews with officials from DGSM who said they don’t administer any levy on the mining of sand, marram, clay and stone quarrying used for commercial purposes.  The Auditor General reported that he also sampled the districts of Tororo, Kasese, Bushenyi and Shema where he discovered that those local governments were not collecting any fees from such activities.

“Through the interviews conducted with the Director, DGSM, audit established that the DGSM did not regulate the mining of sand, clay, murram and stone quarrying contrary to the definition of industrial minerals as spelt out in the Mining Act and as a result could not levy royalties on these activities,” the report reads. “Commercialized industrial building materials remained inappropriately regulated, leading to loss of government revenue and uncontrolled siltation of the lakes for sand mining,” the report adds.

Demand for building materials has been steadily increasing largely due to the thriving construction business in the country, leading strategists to urge government to consider defining those materials as minerals and appropriately taxing them.

Report by Edward Ssekika