Iran Mining Sector Censures New Environmental Tax

The government is set to oblige mine owners pay 1% of their revenues as tax to ameliorate the damage inflicted by their operations on the environment.

Naturally, miners are up in arms about it, decrying that the move will impede the sector’s feeble growth and drive smaller mines out of business.

Mining sector officials lobbied heavily last year to obstruct the law’s implementation. They courted parliamentarians, wrote to the Expediency Council and pleaded with entreated the Guardians Council. But other than a few alterations, the article remained intact and was ratified.

Based on Clause 5 of Article 43 of the sixth five-year development plan (2017-22), which was approved by the parliament in March, mining companies whose operations “harm regional agriculture and residents” are mandated to pay up to 1% of their total sales (in addition to pollution tax) to the treasury so that the damage is restored and the environment is revitalized.

Miners, however, contend that with heavy mining royalty and usufruct fees in place and the government’s opposition to the export of unprocessed minerals, the 1% tax on total sales is both unjustified and unconstructive, and will eventually lead to bigger issues for the mining sector.

The article states that provincial mining councils are to determine whether operations at a mine are environmentally harmful or not. This is while councilors, especially those with voting rights, are mostly government officials, highlighting the mining sector’s notable lack of representation.

According to Qadir Qiafeh, the head of Iron Ore Producers and Exporters Association of Iran, the idea of provincial mining councils, which was originally proposed by miners, envisioned a seven-member council with three private sector representatives.

However, the idea, Qiafeh told Financial Tribune, “sank into oblivion” when reviewed first by Majlis Joint Commission and later by Guardians Council.

The joint commission is a parliamentary body responsible for reviewing the budget bill as well as five-year development plans proposed by the government before its final ratification.

“We initially sought to bolster the mining sector’s performance [by establishing provincial councils], but modifications made by the joint commission greatly reduced the private sector’s share in the councils, which eventually dropped down to zero when reviewed by the Guardians Council. What was supposed to be a boon to mining business will now become a major obstacle,” Qiafeh said in a telephone conversation.

According to the sixth plan, the 15-member provincial councils are headed by the province’s governor. Members of the council with voting rights include deputy governor; the head of provincial industries, mining and trade organization, the head of provincial department of environment, the head of provincial forests, rangeland and watershed management organization and the head of provincial agricultural jihad organization.

Members with no voting rights include the head of provincial chamber of commerce, industries, mining and agriculture; the head of provincial chamber of cooperatives, a judge referred to by the chief justice of Iran, two members of the provincial mining engineering organization, the head of law enforcement forces and two provincial MPs as observer members.

According to Qiafeh, the private sector has next to no representatives with voting rights in the council, while governmental bodies dominate the ranks.

"This is while two agricultural organizations and DOE have voting rights, both of which are basically against mining operations. Provincial councils were supposed to speed up and facilitate decision making. With this makeup, the exact opposite is bound to happen,” he said.

> Call for Splitting Ministry of Industries, Mining and Trade

The industry representative also recommends splitting the oversized Ministry of Industries, Mining and Trade into three smaller bodies of commerce, industries and mining, so that each can be more specialized and efficient in addressing relevant issues.

Qiafeh said the idea is currently being discussed both in the parliament and the chamber of commerce.

The Ministry of Industries, Mining and Trade's inception followed a merger of several ministries under the 10th administration, meant to make the government smaller and more efficient.

Mining experts, however, are doubtful whether the objective has been achieved, arguing that the ministry has now much more to do on its hands, while its mining departments have been downsized with reduced influence.

The downsizing was also recently proposed by the former head of Tehran’s Chamber of Commerce, Industries, Mines and Agriculture, Yahya Al-e Es’haq, saying the reinstatement of Commerce Ministry is key to solving the country's economic problems. He rejected the idea that commerce is an unproductive sector and said it not only includes activities at the level of trade, but also those related to transport services, insurance, banks and new technologies.

“It forms the preceding and following links in the production chain like procurement of raw materials,” he said. “Currently, as little as 25% of the Ministry of Industries, Mining and Trade's focus are directed toward commerce and we should accept the fact that the merger of the ministries was a bad move in the first place.”