Finance Minister Pravin Gordhan’s Budget speech, with an overt position of increasing levies and taxes in the mining industry to make up for deficits, could not have come at a more controversial time for the mining industry.
The minister’s 2017 budget tabled in the National Assembly proposed an increase in the tax rate shareholders pay on dividends.
Gordhan said the dividend withholding tax rate will increase from 15% to 20%, which is expected to raise an additional R6.8 billion.
The Chamber of Mines responded to Gordhan’s speech in a statement, expressing their concerns, that Gordhan’s new tax regime would probably have negative impacts on investment in the South African mining industry.
“The combination or company tax and the dividend withholding tax raises the overall tax rate to above the Organisation for Economic Co-operation and Development (OECD) average, with potential negative impacts on investment,” said the Chamber in a statement.
The Chamber also addressed the Ministers speech regarding Treasury’s intention of taking the necessary steps on the issue of carbon tax.
“We urge great caution about imposing additional costs on trade-exposed carbon intensive companies, which have little scope for reducing their carbon emissions based on their input mix or their production processes in the short to medium term,” the Chamber said.
The Chamber did however, state that it was looking forward to engaging with the National Treasury on offset and rebate measures.
They also highlighted their concerns regarding talks of an acid mine drainage tax. The statement called upon the minister and his tax staff to engage with them to hear their ideas and plans to address the issue in a manner that would not require additional taxes and would simultaneously ease water scarcity in many mining regions, while generating revenue to make them self-sustaining.
Zwane and deputy’s spending spree
Meanwhile controversy-prone Mineral Resources Minister Mosebenzi Zwane has reportedly bought a brand new Mercedes Benz S400 worth R1.35 million with taxpayers’ money, at double the price recommended by government. The minister’s deputy Godfrey Oliphant is alleged to have also bought a Porsche Cayenne worth an estimated R1.33 million.
Both the Minister, and his deputy’s actions make a mockery of the governments cost-saving measures implemented by the treasury, which had cut the cost of new cars for ministers to R750 000.
“It is worrying that while we are faced with deepening poverty as a country, with more than 17 million people on welfare; our political leaders continue with their champagne lifestyles unabated,” Congress of SA Trade Unions spokesperson Sizwe Pamla said.
Department spokesperson Ayanda Shezi said the two were entitled to choose a car worth not more than 70% of their inclusive annual remuneration.
Cosatu believed that to do this, the ministers had to be oblivious to the plight of around 70 000 mineworkers who had lost their jobs over the past two years.
“Workers have been told about austerity measures since 2013, but it is now clear that this was just hot air and gruesome posturing by Treasury, seeing that they approved the purchase of these expensive cars,” said Pamla.
He warned that if Treasury could give the pair a “reprieve” on the austerity measures, struggling workers deserve the same treatment during salary negotiations and wage adjustments.
“This sends a very troubling message to the struggling poor people of this country and these lapses of common sense are participating in the downfall of the ANC-led government,” he concluded.