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Union warns on ANC mining plans

Trade union Solidarity warned on Friday that a proposed mining super-tax could hamper job creation in the sector.

The proposal for a 50 percent super-tax on profits exceeding about 15 percent would discourage new development, said Solidarity Research Institute senior economics researcher Piet le Roux.

File image: Reuters. Credit: REUTERS

The tax threshold would be calculated on the treasury long bond rate plus seven percent.

According to the document's authors, such a super-tax could be expected to yield about R40 billion a year at current prices.

However, Le Roux said market players would adapt their behaviour to less favourable conditions, so the tax yield would almost certainly be less than projected.

“The ANC is fixated on one-year cycles and is disregarding the fact that mining companies have to bear up during long periods of low profitability in order to benefit only now and then from exceptionally high prices,” he said.

“Further, the possibility of high profits is desired, as it encourages entrepreneurs to react quicker - rather than slower - to the opportunity to produce useful products and services.”

Once the possibility of profit decreased, for example by levying a super- tax, investors' enthusiasm would diminish.

There would be less demand for workers in the sector and consumers would also be affected because fewer goods and services would be offered at low prices.

It would be interesting to see if the ANC's investment arm, Chancellor House, would be in favour of paying 50 percent tax on any return above 15 percent, he said.

Solidarity was concerned that the ANC was sticking to its view that economic growth had to be based in government initiatives.

“In an already tough economic climate, current and proposed state interference is responsible for inhibiting growth in the mining industry,” said Le Roux. - Sapa

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