A problem South-Africa is facing is that the wealth created by mines (also called
economic rent) may not yet get distributed satisfactorily evenly between the nation and
investors. In an attempt to find a solution to the abovementioned dilemma, government
initiated a feasibility study for the nationalisation of mines. This proposal was however
waived for two reasons: firstly that it would be unaffordable for government to buy out
private companies and secondly, that it would create discontent amongst foreign
investors, which would result in them withdrawing access to financing. Consequently,
the ANC, during 2012 in the SIMS report proposed a possible implementation of a
resource rent tax (RRT), akin to Australia’s, to ensure that the State receives a
greater/more equitable share of the wealth. Developments in the mining industry since
2012, have drawn attention to two serious issues: labour related concerns and continued
strikes as well as a reduction in foreign direct investment as a result of negative investor
sentiment towards South Africa. These issues are directly related to the perception that
the community (including mine workers) do not benefit fairly from the wealth created by
mines, which results in ongoing labour unrests and subsequently in investment
withdrawal. It would seem that even though no further consideration has been given to
the implementation of a RRT since 2012, it may be regarded as a possible and sensible
solution.
This study focuses on the possible impact on the taxation payable by the South African
mining industry, if a RRT were to be introduced. Research has been conducted in order
to obtain an understanding of the working of a RRT, to analyse South Africa’s current tax
regime, to develop a simple hypothetical case study to evaluate both the quantitative
and qualitative impact of the introduction of a RRT system on South African mining tax
(for both the investor and the state).
The study concludes that the introduction of a RRT can potentially result in a more fair
distribution of resource rents between the investor and the state (community - rightful
owners of the natural resources). Research however proved that this is likely to
influence the investor’s investment decisions which in turn may result in a general
downturn in mining operations and profits. Based on the qualitative results of a case
study, a RRT was proven to be inefficient due to the fact that it will only tax mining
companies with a higher rate of return and in effect higher risk companies. As investors
are prepared to take on high risk projects for the purpose of generating higher returns,
the introduction of an RRT reducing this return might influence an investor’s decision.
The potential impact on investors’ decisions may be counteracted through further
research with regard to variables used in the RRT model namely the percentage of tax
charged and the required rate of return. A RRT is therefore proven to have some
benefits, even though some aspects will require further evaluation. / MCom (South African and International Tax), North-West University, Potchefstroom Campus, 2015
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:nwu/oai:dspace.nwu.ac.za:10394/15744 |
| Date | January 2015 |
| Creators | Venter, Lindie |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Thesis |
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