CityPress - - Business - DEWALD VAN RENS­BURG dewald.vrens­burg@city­press.co.za

he Davis Tax Com­mit­tee has shot down vir­tu­ally all the re­main­ing rad­i­cal tax-re­lated plans stem­ming from the “na­tion­al­i­sa­tion de­bate” and the ANC’s 2012 State In­ter­ven­tion in the Min­er­als Sec­tor (Sims) re­port. In­stead, its first in­terim re­port on min­ing rec­om­mends changes that will prob­a­bly favour most mines, even while dis­man­tling the anoma­lous tax sub­sidy en­joyed by start-up and mar­ginal gold mines.

The re­port, pre­sented to Fi­nance Min­is­ter Nh­lanhla Nene in June, was re­leased for public com­ment this week.

Like its pre­vi­ous re­ports that tac­itly re­jected higher cor­po­rate or per­sonal in­come tax, the min­ing re­port strikes a rel­a­tively con­ser­va­tive chord, with the cur­rent frailty of the min­ing sec­tor weigh­ing heav­ily on the rea­son­ing by the com­mit­tee.

The Davis com­mit­tee has un­am­bigu­ously ruled out plans for wind­fall taxes or the re­source rent taxes that formed an im­por­tant part of the Sims re­port. It also re­jects the idea that mine roy­al­ties could be ring-fenced for the ben­e­fit of the com­mu­nity around the mine, call­ing it “too big a de­par­ture from cur­rent gov­ern­ment pol­icy”.

Ex­port taxes to en­cour­age ben­e­fi­ci­a­tion are also re­jected, largely be­cause the one ex­ist­ing ex­am­ple, for di­a­monds, has proved to be a dis­mal fail­ure.

The com­mit­tee says that in­stead of im­pos­ing new taxes, South Africa should wait for the vari­able profit-linked min­eral roy­alty sys­tem that was es­tab­lished in 2010 to prove it­self.

The roy­alty sys­tem co­in­cided with the end of the min­er­als boom and it re­mains to be seen how much money it brings in when times are good.

One pro­posal from the min­ing sec­tor was pos­i­tively re­ceived: that cap­i­tal ex­pen­di­ture on so­cial and labour plans – for in­stance com­mu­nity fa­cil­i­ties – be­come tax-de­ductible.

The re­port also sug­gests that the is­sue of “do­mes­tic trans­fer pric­ing” in min­ing groups should be ex­plored, but only by the sep­a­rate base-ero­sion team in the Davis com­mit­tee.

This fol­lows a re­cent re­port from the union­friendly think-tank, The Al­ter­na­tive In­for­ma­tion and De­vel­op­ment Cen­tre, on plat­inum pro­ducer Lon­min.

The re­port called on author­i­ties to shift the fo­cus of work on abu­sive trans­fer pric­ing to the

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