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UN Financing for Development Office & IFAD Rome, 4-5 September 2007 M Grote

Tax Aspects of Domestic Resource Mobilisation – a Discussion of Enduring and Emerging Issues Taxation of Natural Resources – Annex: Cross-country comparisons: royalties & rent taxes. UN Financing for Development Office & IFAD Rome, 4-5 September 2007 M Grote National Treasury, South Africa.

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UN Financing for Development Office & IFAD Rome, 4-5 September 2007 M Grote

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  1. Tax Aspects of Domestic Resource Mobilisation – a Discussion of Enduring and Emerging IssuesTaxation of Natural Resources – Annex:Cross-country comparisons: royalties & rent taxes UN Financing for Development Office & IFAD Rome, 4-5 September 2007 M Grote National Treasury, South Africa

  2. SA proposed royalty rates (Draft 2006)

  3. Cross-country analysis of royalty regimes

  4. Cross-country analysis of royalty regimes – African jurisdictions

  5. Western Australia – royalty rates as on 1 January 2003

  6. Western Australia – royalty rates as on 1 January 2003, in Australian $/c

  7. International royalty rates (in %) comparisons across commodities

  8. International royalty rates (in %) comparisons across commodities

  9. International royalty rates (in %) comparisons across commodities

  10. International royalty rates (in %) comparisons across commodities

  11. 2004/05 Cross-country tax rate analysis PriceWaterhouseCoopers Corporate Taxes – Worldwide Summaries April 2005 NBER Working Paper on Developing Countries’ Tax Structures

  12. 2004/05 Cross-country tax rate analysis PriceWaterhouseCoopers Corporate Taxes – Worldwide Summaries April 2005 NBER Working Paper on Developing Countries’ Tax Structures2006 Index of Economic Freedom – Heritage Foundation & Wall Street JournalDeloitte.Touche – Guide to Key Fiscal Information, Southern Africa, 2005/06

  13. 2004/05 Cross-country tax rate analysis PriceWaterhouseCoopers Corporate Taxes – Worldwide Summaries April 2005 NBER Working Paper on Developing Countries’ Tax Structures2006 Index of Economic Freedom – Heritage Foundation & Wall Street JournalDeloitte.Touche – Guide to Key Fiscal Information, Southern Africa, 2005/06

  14. SA gold mining tax formula • 1966 gold mining formula had average tax rate spreads ranging from 0% to 70.5%. (unacceptable, as every $ of profit should attract income tax, but govt. created incentive to mine marginal ore) • Only taxable income from 5% profit ratio upwards attracted tax • Currently, income derived from mining of gold is calculated according to following formulae (on basis of new 2005 corporate rate of 29%): • Y = 35 – 175/X (elected to be exempt from STC). • Y = 45 – 225/X (not exempt from STC), • where Y is the percentage tax payable and x is profit ratio of the mine, expressed as percentage. • Profit ratio (x) is calculated as follows: taxable income from gold mining over gross mining income.

  15. Tax effect of SA gold mining formula: Y = 45-225/X

  16. Cross-country analysis - oil & gas Jurisdictions favour: • Separate oil and gas tax legislation, not part of mining regime • back-end loaded regime due to immediate expensing of all investments Profile of ‘most favoured’ fiscal regime based on study (1997) comparing 43 countries: • Tax design based on field-by-field approach • 95,3% of countries levy CIT with average nominal rate of 33,9% • 83,7% impose CIT in combination with royalty • 12 apply sliding scale royalties based on production vols: 0-30% • 15 impose fixed royalties, from 12 to 15% • 14 front-end load through bonus bidding • 46,5% impose acreage fees • production sharing contracts are not favoured (only 4 then - more now) • carried equity participation by Government limited (12%) • rate of return-linked windfall profit taxes are mostly rejected

  17. Competitive outlook for key mining jurisdictions • Canadian Fraser Institute Annual Survey of Mining Companies: 2004/05 – based on feedback of 1 121 international senior & junior mining co’s • Policy Potential Index - report card to governments on attractiveness of respective mining policies, tax, environmental regs., admin regs & compliance burden, native land claims/equity participation, infrastructure, labour laws, political stability. Highest possible score on index is 100: • Nevada at 95 (highest), Manitoba 89, Alberta/Ontaria 78, Western Australia 74-78, Chile 74, Chile 74, Mexico 71, Ghana 60, Tanzania 56, China 49, Brazil 47, Peru 46, Zambia 38, Botswana 35, SA 32 (2002/03 still 47), Philippines 24, Russia 19 (4th lowest), DRC 11, Zimbabwe 8 (lowest) • Mineral Potential Index, rates region’s geological attractiveness: • Nevada 96 (highest), Chile 94, Quebec 89, W-Australia 87, Mexico 87, Brazil 83, Mali 80, Tanzania 77, Ghana 76, Peru 74, China 72, Botswana 67, SA 54 (2002/03 71), Russia 53, Zambia 53, Alaska 43, Zimbabwe 22, California 16 (lowest) • Best Practices Mineral Potential Index: shows mineral potential of countries, assuming their policies are based on best practice together with mineral potential: • Tasmania 100 (highest), Alaska 98, W-Australia 97, Russia 93, SA 91 (tied with New South Wales & South Australia, China, Zambia, Mexico), Botswana 84, Ghana & Mali 83, Zimbabwe 60, Ireland 38 (lowest).

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