Thursday, 24th February 2005 (2916 views)

The South African government has restated its plan for the Royalty Bill, insisting that it will tax sales rather than profits.

The draft royalty law is set to be published later this year, but the plans to tax companies total earnings rather than their net profits has prompted widespread concern among many mining outfits.

However, finance minister Trevor Manuel has said that the National Treasury will revise the bill in order to accommodate industry concerns.

"While government remains committed to an ad valorem royalty on gross sales, the bill is undergoing substantial refinements in view of the comments received, industry financial data analysis and new cross-country royalty analysis," the Treasury told Reuters.

"Among the options under consideration is the appropriateness of the current tax allowances scheme, and the resultant tax deferral benefit enjoyed by mining companies," it added.

Plans for changes to the bill are likely to focus on the manner of taxation, but the legislation also includes details for boosting smaller mining operations and for catalysing the domestic jewellery manufacturing sector.

The royalty plans were first unveiled in 2003, with rates originally set at South one per cent for oil, three per cent for gold, four per cent for platinum and eight per cent for diamonds.

 

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