Treasury gives in to De Beers on tax
June 6, 2007
By Michael Hamlyn
Cape Town - At the request of the De Beers group, the national treasury has agreed to broaden the definition of a large diamond producer in the Diamond Export Levy Bill.
Instead of giving companies an exemption from the levy when their gross sales exceeded R5 billion a year, Cecil Morden, the chief director of tax policy, told MPs yesterday that the threshold would be reduced to R3 billion.
In a written submission to the finance portfolio committee, which is considering the bill, De Beers said: "This figure does not take account of the risk of exchange rate fluctuations, [so] the threshold should be reduced."
The exemption from the levy will be given only if the producer sells at least 40 percent of its diamonds for local beneficiation.
The treasury is considering other requests from De Beers, including a proposal that net exports be accounted for instead of gross exports.
Companies tend to export the best diamonds and import lower-quality stones, which they sometimes give to local beneficiators.
The diamond producer pointed out that the formulation in the current draft of the bill did not cater for large producers that might choose this method.
The treasury is considering changes at the request of other diamond producers. At present, the bill recognises only companies with less than R10 million in annual sales as small producers.
Mattie Lötter, the chairman of the SA Diamond Producers' Organisation (Sadpo), wanted the definition of small businesses to chime in with definitions in other legislation, such as the trade and industry department's codes of practice.
The department defines small business as companies with turnover of less than R35 million. The treasury said it would consult the department this week.
Sadpo is primarily a lobby group for the alluvial diamond mining subsector.
Morden told the committee that a request from Trans Hex would undermine the whole purpose of the bill.
Exemptions will be given to medium-sized companies only if they sell 15 percent of their production to local beneficiators. Trans Hex described the limitation to beneficiators as "inequitable and prescriptive". But Morden was adamant: "We cannot concede this request."
Sam Louw, an ANC MP from Kimberley, said the treasury was too tender towards De Beers. "Why are you so flexible with the large producers?" he asked. "The limit for large producers must stay at R5 billion. R3 billion is not acceptable."
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