South African finance minister Pravin Gordhan said on Wednesday, 23 January at the World Economic Forum in Davos, Switzerland, that he had no immediate plans for new mining taxes, but that the matter would be kept under review.
"There is no question of any taxes at this time. We will keep the matter under review and when we think it’s appropriate, we’ll see how the regime needs to change," he said.
Mining companies paid R25.8 billion in corporate tax in 2011 – nearly a fifth of South Africa’s corporate tax – and R5.5bn in royalties. A further R9 billion reached the fiscus from income taxes from mineworkers.
A new tax regime has been proposed in the State Intervention in the Mining Sector (SIMS) report, which is expected to be the subject of 'intense' negotiations this year. It was commissioned by the ANC in 2010, released in February 2012 and has been the subject of two ANC national policy conferences in June and at Mangaung respectively.
The original SIMS report, summarised in a slide presentation by Webber Wentzel and shown in London in June last year, rejects outright nationalisation, but recommends a host of 'targeted state interventions' as a palliative to nationalisation:
- Selective nationalisation of certain companies of strategic value;
- Concessioning prospecting and mining rights by public tender;
- Giving the state mining company preferential exploration rights;
- Increasing state participation in mining companies;
- Increasing the fiscal burden on mining companies;
- Increasing local beneficiation in the downstream market;
- Increasing local content in the upstream market.
The SIMS report further recommends the following fiscal reforms:
- Introducing a 50% resource rent tax on all mining profits above a 15% return on capital
- Reducing royalties to 1% of revenue;
- Imposing a 50% capital gains tax on the transfer of prospecting rights before the commencement of mining operations (so-called 'flipping');
- Imposing a 30% withholding tax on dividends remitted to investors in 'tax havens' (i.e. double the current rate applicable to all dividends);
- Imposing export duties and infrastructure tariffs, and prohibiting scrap metal exports, to encourage local beneficiation;
- Amending the exchange control regulations to prohibit the sale of platinum without National Treasury approval.
According to Webber Wentzel, some of the SIMS report’s proposals (including the 50% resource rent tax) have been endorsed by the influential National Union of Mineworkers, as well as several of the ANC’s provincial bodies.
