"Mining operations" and "mining" are defined in s 1 of the Income Tax Act (ITA). A concept that is of great significance to this definition is the matter of when a mineral is won and the related question of when does the mining process end and the process of manufacture commences. Case law has not established a definitive point that can be used by the mining taxpayer to determine where the mining process ends for income tax purposes. The Supreme Court of Appeal was presented with the perfect opportunity in the Foskor1 case to clearly define the boundaries between these processes. Unfortunately, the court did not seize this opportunity to provide legal certainty. The significance of the distinction lies in the fact that a mining taxpayer is allowed to claim accelerated capital allowances. The objective of these allowances is to provide tax relief to the mining taxpayer taking the immense risk of investing billions of rands in capital expenditure. The capital expenditure incurred will also result in direct foreign investment. This in turn will result in economic growth and job creation. Currently, there is no legal certainty as to which processes will qualify as mining operations for income tax purposes. This may result in mining taxpayers being hesitant to incur capital expenditure as the risk relating to a project would have increased. The accelerated capital allowances may therefore not serve their intended purpose. The gross domestic product (GDP) contribution from gold mining has been decreasing in the last number of years, but this decrease has to a large extent been offset by an increase in the downstream or beneficiated minerals industry. This industry has also been identified by Government as a growth sector. The downstream or beneficiated mineral industry may not be catered for in the current definition of "mining operations" and "mining" and may therefore not qualify for beneficial tax allowances. It is therefore proposed that the term "won" as used in the definition of "mining operations" and "mining" should be defined in s 1 of the ITA as follows: A mineral is "won" when all the requisite and necessary processes, including, amongst other things, refinement, beneficiation, smelting, separation, have been undertaken to the mineral to render it saleable in an open and general market. This extension will provide legal certainty to a mining taxpayer and will ensure that South Africa obtains direct foreign investment and maximum value for its minerals. This will contribute to economic growth for South Africa's developing economy and result in job creation.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:nmmu/vital:8948 |
| Date | January 2010 |
| Creators | Cloete, Loriaan |
| Publisher | Nelson Mandela Metropolitan University, Faculty of Business and Economic Sciences |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Thesis, Masters, MCom |
| Format | xi, 83 leaves, pdf |
| Rights | Nelson Mandela Metropolitan University |
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