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Davis committee against windfall taxes in mining sector

Tuesday, 18 August 2015   (0 Comments)
Posted by: Author: BDlive
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Author: BDlive

SA should not consider additional tax instruments, such as a windfall tax for the country’s mining sector, a commission set up to look into taxes in Africa’s most advanced economy said in a report published on Thursday.

The Davis Tax Committee, established by the Treasury, also recommended that the government should revamp its gold tax mining regime but do so in a manner that would not jeopardise jobs in the industry.

"The Committee takes the view that new tax instruments are not necessary," said the report, a copy of which was sent to Finance Minister Nhlanhla Nene.

Senior officials in the ANC had called for windfall taxes to be imposed during the recent commodity boom.

The committee also said that while it preferred that the tax regime applied to gold producers be brought into line with other companies in the mining industry, it recommended the status quo be maintained for existing mines to protect jobs.

"In order not to precipitate further decline in employment, particularly in marginal mines, the Committee recommends that the mining formula be retained for existing gold mines," it said.

Most mining companies are taxed at a standard 28% corporate income tax rate but taxes paid by gold firms are linked to their profit margins, a measure meant to cushion an industry facing its sunset years.

The mining industry, which contributes around 7% to South Africa’s economy, is struggling with sinking commodity prices, rising costs and labour unrest and a number of firms have announced plans to reduce jobs.

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