Mining royalties law ‘still being debated’

(How to pluck the golden goose without killing it)

SA’s long-awaited and controversial mining royalties law will probably not be concluded this year, says South African Revenue Service (SARS) head Pravin Gordhan.

“There are still areas of debate. There’s no certainty as to when the bill will be finalised, but it appears it is heading for some time next year,” Gordhan told the South African Mining Development Association Global Mining Transformation Conference.

In February, Finance Minister Trevor Manuel reiterated that mining royalties would be based on sales, rather than profits as the industry wanted, and said legislation was being redrafted to account for companies’ concerns.

Mining companies say a royalty on sales will hurt less profitable mines and have a substantial effect during a mine’s start-up.

Plans for a royalty were unveiled in 2003, but last year the effective date for royalties was delayed by two years until 2009.

The conference also heard that government and SARS are reviewing the tax formula for the gold-mining sector. Gordhan said the existing formula had a history that suited a particular time but circumstances had changed.

It would take time to construct a new way of looking at the mining sector. There would be appropriate consultations. SARS was aware the sector played a significant, but diminishing, role in the economy. In 2003-04 the sector’s contribution to the fiscus was 11,6 per cent. Last year it fell to 4,7 per cent. SARS wanted it back to 10 per cent.

Asked whether government thought the mining sector was not paying enough tax and if it was harassing marginal mining companies, Gordhan said harassment was not SARS policy. “Our job is to make sure you do the right thing and flourish as a business.”

Source: Charlotte Mathews Mining Royalties Law ‘Still being Debated’ Business Day 20 September 2005-09-26

For text:

FMF Policy Bulletin/ 27 September 2005
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