The South African government is reconsidering its proposals for the royalty that will be effective for the gold mining industry, Treasury chief director of tax policy Martin Grote has confirmed.
“The effects of any royalty on the gold mining industry will be steep in terms of labour and the government will need to be careful. The decision lies with the Minister of Finance [Trevor Manuel],” Grote said.
However, the royalty on gold mining would remain an ad valorem or revenue-based one, he added.
The South African government’s present proposal is for a royalty on revenue of 3% for gold mining companies.
The official opposition Democratic Alliance has welcomed the news that the National Treasury was considering cutting the planned royalty of 3% on gold miners’ sales.
“It appears the government is finally accepting that this tax on turnover could have a devastating effect on the sustainability of marginal mining operations,” DA mining spokesperson Ian Davidson said.
A tax on turnover would be a disincentive for both the expansion of existing enterprises and investment in new operations, Davidson added. In March 2003 the South African government issued the first draft of the Royalty Bill for comment.
The Bill proposed a royalty of revenue 8% for diamond companies, 4% for platinum group metals, 2% for coal and 2% for base metals. The mining industry has called for a profit-based royalty rather than a revenue-based one. – I-Net Bridge