Dennis Davis
Photo by: Duane Daws
JOHANNESBURG (miningweekly.com) – The Davis Tax Committee’s (DTC’s) first interim report on mining tax has come out against a full overhaul of the current tax regime imposed on mining companies.
The report, released on Thursday for a second round of public comment, showed the DTC mining subcommittee disagreeing with many of the proposals for the introduction of new tax instruments unless it was “absolutely necessary”, indicating that the current mineral royalty already covered many of the suggestions.
“Over the last few years, there have been various calls to change or introduce new tax instruments to the mining tax system, such as windfall taxes, resource rent taxes, surcharges based on cash flows and separate flat royalty charges,” the document noted.
The Dennis Davis-led committee pointed out that the mineral royalty had been carefully designed to achieve a “strong balance” of ensuring that the royalty was “responsive” to different economic circumstances, capturing rents when profits were high and ensuring a measure of cover for the fiscus in the form of a minimum revenue stream during weak economic cycles and low commodity prices.
“The mineral royalty charge is reasonably new and needs to be given a chance to prove itself,” the committee added.
The committee said it would, however, prefer to bring the taxes imposed on the gold mining industry in line with the rest of the tax system as much as possible, but without jeopardising jobs by removing the formula for existing gold miners.
“In order not to precipitate a further decline in employment, particularly in marginal mines, the committee recommends that the mining formula be retained for existing gold mines,” it added.
“This is not to say that tax policy should be neglected but that changes to tax design should be approached cautiously without trying to achieve too much or to compensate for problems, which lie outside the tax system.”
Presented to Finance Minister Nhlanhla Nene early in July, the DTC report would be open for public comment until October 31.