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Kumba’s tax woes deepen with R5.5bn claim from SARS

Monday, 29 February 2016   (0 Comments)
Posted by: Author: Allan Seccombe
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Author: Allan Seccombe (BDlive)

Kumba Iron Ore, the Anglo American subsidiary, will contest a R5.5bn tax claim from the South African Revenue Service (SARS) after an audit.

The R5.5bn bill includes R3.7bn in interest and penalties, and follows an audit of the tax years 2006 to 2010 at its 73.9%-owned subsidiary, Sishen Iron Ore Company (SIOC).

Kumba told the market at the time of its full-year results presentation on February 9 that it had a R1.8bn tax bill, excluding interest and penalties, the extent of which it did not disclose at the time because SARS had not fully informed it of the amount.

"SIOC has co-operated fully with SARS during the course of the audit, but, supported by its specialist tax and legal advisers, disagrees with SARS’s audit findings," Kumba said in a statement.

"SIOC is therefore in the process of preparing an objection to the assessment, together with an application to the commissioner of SARS for a suspension of payment until the matter is resolved," it said.

The notification came just weeks after Anglo American said it was considering its options to exit its 69.7% stake in SA’s largest iron ore miner.

For its full year to end-December, Kumba reported headline earnings per share fell by two-thirds to R11.82, while basic earnings per share collapsed to R1.46 compared with R33.44 a year earlier. The impairment charge of R6bn on the Sishen mine was the key reason.

Despite the difficult year — in which the iron ore price fell 42% to $53 a tonne and Kumba’s production dropped 7% to 44.9-million tonnes because of a change in mining plans at its flagship Sishen mine to reduce costs to cope with an ever gloomier iron ore market — the company paid R900m in corporate tax and royalties, CEO Norman Mbazima said on Monday.

"As a responsible corporate citizen, Kumba and its subsidiaries believe that all taxes owed under South African tax legislation have been paid and that we comply with all applicable tax laws in all jurisdictions in which we operate," he said.

Sishen is scaling back production at its flagship Sishen mine and it has said it will retrench 2,633 employees and reduce contractor numbers by 1,300 at the mine, SA’s single largest iron ore mine.

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