TITLE:
The Influence of Tax Legislation in Promoting Downstream Beneficiation in the South African Mining Sector
AUTHORS:
Debra-Ann Katrina Collyer, Daniel Petrus Schutte, Pieter Van der Zwan
KEYWORDS:
Mining Sector, Tax Incentives, Mineral Royalties, Refined Mineral Resources, Downstream Beneficiation
JOURNAL NAME:
Theoretical Economics Letters,
Vol.8 No.2,
February
7,
2018
ABSTRACT: Downstream beneficiation in the South African mining
industry is promoted in the Mineral and Petroleum Resources Development Act.
This research evaluated the influence of existing tax and royalty legislation
in promoting downstream beneficiation, and the economic decisions of mining
companies to respond to the benefits provided for in the legislation. The
research commenced with a theoretical analysis of tax and royalty legislation
to determine existing provisions in the law that could stimulate the process of
downstream beneficiation, or alternatively discourage potential beneficiators,
or frustrate the activities of existing refiners. Role players in industry were
engaged to analyze tax incentives in legislation that influence the economic
decision making of the extractors in response to the legislation either
supporting or deterring downstream beneficiation in their value chain. The data
obtained from the extractors were analyzed and interpreted to determine how tax
legislation has influenced the promotion of beneficiation in the South African
mining sector. The research found that tax legislation influenced some of the
extractors to a limited extent, indicating that the intent of tax legislation
to promote beneficiation was not consistently achieved. It was further observed
that the available incentives did not have a sufficiently decisive impact on
the extractors to beneficiate; however
it was also determined that tax legislation indeed has the ability to promote
beneficiation in the South African mining industry. Finally, tax legislation
was not found to discourage refining activities. It is recommended that further
studies be conducted to determine whether tax incentives are too simplistic to
effectively apply in all circumstances or whether more advanced formulas are
required based on the various types of minerals beneficiated.