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Zimbabwe suspends tax on diamond sales -letter to IMF

Reuters - UK Focus

HARARE, April 30 (Reuters) - Zimbabwe has temporarily suspended a 15 percent tax on diamond sales, citing a drop in production and low international gem prices, the finance minister and central bank governor said in a letter to the International Monetary Fund (IMF).

The southern African country last October ordered diamond mining companies to deduct a 15 percent tax from gross sales of diamonds, backdated to April of the same year.

In a letter to the IMF dated April 17, Finance Minister Patrick Chinamasa and Reserve Bank of Zimbabwe (RBZ) Governor John Mangudya said the decision to suspend the tax was part of efforts to improve the viability of the mining industry.

Diamond mining companies last year criticised the levy, saying it would choke a sector hit by weaker diamond prices.

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"We have temporarily suspended the collection of the special dividend on diamond sales on the back of the drop in production and adverse price developments," said the letter, which was published on the IMF website.

Zimbabwe, one of the world's top diamond-producing countries, is believed to hold 25 percent of the world's reserves of opencast extractable diamonds, with the eastern Marange fields its major diamond source.

The government owns half the shares in all the mines in Marange, which produces alluvial diamonds that are of a lower quality than the gems mined at Rio Tinto (Xetra: 855018 - news) 's Murowa mine in south central Zimbabwe.

Murowa produced 344,000 carats in 2014 but production figures from mining companies operating in Marange area, which produced 14 million carats in 2013, are not yet available.

Mining generates half of Zimbabwe's export income but the sector has been hit by low mineral prices and a 15 percent tax levied on unrefined platinum in January.

The IMF has downgraded Zimbabwe's 2015 growth forecast to 2.8 percent from 3.2 percent initially due to an underperforming mining sector and low agriculture production. (Reporting by MacDonald Dzirutwe, editing by David Evans)