Finance Minister Pravin Gordhan says there are no immediate plans to increase mining taxes, despite the African National Congress (ANC) proposing that the government extract more revenue from the industry.
At its national conference last month, the ANC rejected proposals to nationalise mines, in favour of higher taxes. A study commissioned by the party had recommended a mineral resource rent tax of 50 percent on profits above 15 percent of "normal returns" and a reduction of the royalty tax to a base 1 percent.
Several mining companies, which have seen profit margins eroded by soaring electricity tariff increases and other input costs, are mothballing shafts, selling mines and retrenching workers.
› No plans for mining tax hikes, says Gordhan
› Residents vow to vote ANC out of power
Mr Gordhan said on Wednesday at the World Economic Forum in Davos, Switzerland, that he had no immediate plans for mining taxes.
"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."
Anglo American Platinum’s proposed restructuring would cost the government about R4bn-R5bn, but this could be adjusted.
"We must be careful not to take a dispute in one or two mines in the platinum sector and generalise it to mining, because coal is working fairly well, oil is working fairly well, gold is working fairly well," Mr Gordhan said.
Mining companies paid R25.8bn in corporate tax in 2011 — nearly a fifth of South Africa’s corporate tax — and R5.5bn in royalties. A further R9bn reached the fiscus from income taxes from mineworkers.
Tax experts said Mr Gordhan’s comments were welcome, but doubts remained in the mining sector over changes in the fiscal regime, perpetuating the uncertainty spooking investors.
"It’s definitely a positive development that he (Mr Gordhan) says there’ll be consultation, but there’s still uncertainty about what exactly will be introduced," KPMG mining tax expert Andries Myburgh said.
His colleague, Ben-Schoeman Geldenhuys, said the Treasury had a track record of interacting with industry role players before making changes to fiscal policy. "We’ve rarely seen fundamental, surprising policy changes," he said.
The mining industry and its tax consultants should grab the chance when it arises to discuss its entire tax burden, Mr Myburgh said.
Clarity was required on the tax treatment of companies’ spending on social and labour plans, and building houses for their workers in line with obligations under the Mineral and Petroleum Resources Development Act and the Mining Charter.
"There’s a lot of uncertainty around the tax deductibility of those costs for mining companies. It could almost be seen as a separate tax," Mr Myburgh said.
The mining sector spent R2bn on community development and social investment projects in 2011.
Article continues on page two: many countries are asking whether they are getting enough mining royalties...