mining firms were relieved that Finance Minister Pravin Gordhan had made no mention of introducing a contemplated “super profit” tax in his Budget speech on Wednesday, tax experts said yesterday.
However, he did say mining tax policy would be reviewed, so the sector will hold its breath.
The tax was mooted in the ANC’s document on state intervention in mining, which proposed the introduction of a 50 percent resource rent once a return on investment threshold of 15 percent was achieved.
The nationalisation of mines is now off the table.
Gordhan said Judge Dennis Davis would chair a tax policy review committee.
Wickus Botha, Ernst & Young’s mining and metals sector leader for Africa, said yesterday: “While it may be a relief to some, I don’t think there was an expectation of introducing a windfall or wealth tax, particularly given that the mining industry is not that profitable across all commodities at the moment.”
Peter Leon, a mining law expert at Webber Wentzel, feared there would be continued uncertainty about the range and scope of any new mining taxes or changes to the existing royalty regime.
He expected the mining royalty proposal would not be clarified until Judge Davis’s commission completed its work. He added: “As this could be several years away, this could potentially have an inhibiting effect on any new investment. I would have thought that this was more significant than any short-term movement in company share prices.”
Dale Cridlan, a director at Norton Rose, said the announcement that there would be no immediate increases to mining tax rates or mineral royalty rates was positive.
“It was, however, also announced that the mining tax regime and particularly the current royalty tax regime will be subject to review as part of a broader investigation into the tax system.
“Some uncertainty will therefore remain in the mining industry, until such time as the outcome and the recommendations of the mining tax review are made known,” he said.
Abdul Davids of Kagiso Asset Management agreed that there was relief among mining companies, however “the government is targeting those companies that have artificially low taxes as well”.