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Experts split on mining supertax
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Sanchia Temkim
Business Day
Friday, May 28, 2010
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Tax analysts are divided on whether the Australian government’s proposed supertax on resources could lead to mining companies scaling down their investments in the country and channelling them into Africa.
Some believe that the proposed tax could benefit resource-rich African countries, while others maintain that the move by the Australian government could set a precedent for other countries to follow.
Kemp Munnik, a director at the South African operation of the world’s fifth-largest audit network, BDO, said yesterday companies were likely to move their investments to countries with favourable tax regimes.
“Due to the fact that there is a two-year window until the introduction of the tax hike, it is likely that mining houses will consider expanding their portfolio to manage risk and to acquire operations in countries that offer more attractive tax rates.”
Munnik said the African arm of BDO had already seen an increased appetite for mining and exploration in Africa, with many companies putting out “feelers”.
They had noted interest in three commodity-rich countries — Zambia, Botswana and Mozambique — which offered attractive tax rates.
Zambia offered a variable tax rate of between 15% and 35% and had no exchange control. Botswana had a tax rate of 25% and Mozambique offered a 10-year discount on its 35% tax rate and other exemptions, including sales tax and duties on mineral exports, he said.
However, Emil Brincker — a tax director at commercial law firm Cliffe Dekker Hofmeyr — said that other governments, including some in Africa, could be considering imposing an additional tax on mining companies. “It is difficult to say whether this additional tax will take the form of a super-profit tax,” he said. “One thing is certain, though — governments are not averse to imposing taxes on mining houses.”
Munnik said: “African countries desperately need foreign investment. It is highly unlikely they would consider imposing an additional tax. Zimbabwe is a possible exception, which might seize the opportunity to ‘milk’ the mining companies.”
Okkie Kellerman, a tax executive at corporate law advisers Edward Nathan Sonnenbergs, said mining houses might be sceptical of investing in Africa due to political instability. The danger is that governments could change overnight, and with that the tax dispensation, Kellerman said.
It was too early to see whether mining houses would consider setting up operations elsewhere, he said.
“Mining houses are still in talks with the Australian government over a reduction in the levy. The detail would ultimately be in the legislation.”
Africa could benefit from further investment, provided the continent ensured political stability, he said.
Since the announcement of the proposed supertax earlier this month, a significant number of companies have confirmed their intention to consider scaling down their investments in Australia. These include Xstrata, Santos, Cape Lambert and Peabody.
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