The newly established Tax Review Committee, which has been established by Finance Minister Pravin Gordhan to conduct a far-reaching assessment of the tax system and its calibration to the country’s developmental objectives, will also assess the appropriateness of the prevailing mining tax regime.

However, the terms of reference stress that the review should take account of the challenges facing the mining sector, including low commodity prices, rising costs, falling outputs and declining margins.

Gordhan confirmed the terms of reference when he unveiled the committee’s composition on Wednesday, having initially announced his intention to form the committee in the February Budget address. The overarching goal is to assess South Africa’s tax policy framework and its role in supporting the objectives of inclusive growth, employment, development and fiscal sustainability.

Judge Dennis Davis will chair the committee, whose other members are professors Annet Wanyana Oguttu, Matthew Lester, Nirupa Padia and Ingrid Woolard, as well as Dr Nara Monkam, Tania Ajam and Vuyo Jack.

The National Treasury’s Cecil Morden and the South African Revenue Service’s (Sars’) Kosie Louw, will be ex-officio members, providing technical support and advice to the committee. The National Treasury and Sars will provide secretarial support to the committee, which will be accommodated by Sars.

The terms of reference related to mining taxes are arguably less heavy handed than might have been anticipated following the African National Congress’s adoption of the State Intervention in the Minerals Sector (Sims) policy document at its national conference in Mangaung last year.

Admittedly, the Sims document was written partly in response to what were then vociferous calls for mine nationalisation. Instead of blanket nationalisation, the document proposed a resource rents tax, targeting super profits earned by miners when prices surged. The domestic industry generally rejected the notion, as it had the calls for nationalisation.

But the terms of reference placed before the committee arguably show an even greater degree of sensitivity to the current perilous state of many operations in the sector, which have come under pressure from falling commodity prices, rising costs and labour unrest.

They state that the review should be conducted in line with the agreement between government, labour and business to ensure that the mining sector “contributes to growth and job creation, remains a competitive investment proposition, and all roleplayers contribute to better working and living conditions”. The committee should also assess the current contribution to tax revenues.

Any tax proposals arising from the committee, which will be made in the form of recommendations to the Finance Minister, would be announced as part of the normal budget and legislative processes and would be subject to public consultation and Parliamentary oversight.

The committee was requested to take account of recent domestic and global developments and, in particular, the long term objectives of the National Development Plan. It would also evaluate the South African tax system against international tax trends, principles and practices, as well as recent international initiatives to improve tax compliance and deal with tax-base erosion.

Gordan requested that the committee pay specific attention to the following:

• An examination of the overall tax base and tax burden including the appropriate tax mix between direct taxes, indirect taxes, provincial and local taxes.
• The impact of the tax system in the promotion of small and medium-size businesses.
• A review of the corporate tax system with special reference to the efficiency of the structure, incidences of tax avoidance, incentives and the average effective corporate income tax rates in the various sectors of the economy.
• The appropriateness of the mining tax regime.
• Taxation elements within the financial sector, including for long-term insurers, hedge funds, innovative financial instruments and the vale-added tax treatment of financial services.
• Value-added tax with specific reference to efficiency and equity.
• The impact of e-commerce on the tax base.
• The progressivity of the tax system and the role and continued relevance of estate duty to support a more equitable and progressive tax system.
• An evaluation of proposals to fund initiatives, such as the proposed National Health Insurance scheme and long-term infrastructure projects.
• An evaluation of the legislative process with a view to both enhancing simplicity and ensuring the protection of the tax base and to recommend how to improve the current process.

No mention was made of the proposed carbon tax, but Gordhan indicated that the committee was mandated to study any further tax issues which, in its view, should be addressed in order to promote inclusive economic growth, employment creation, development and fiscal sustainability.

The committee is required to submit interim reports and a final report, which will be published on dates yet to be determined.