11 October 2006
The Diamond Export Levy Bill is required to give effect to certain
provisions of the Diamonds Act, 1986, as amended. Section 73(2) of the
Constitution requires that only the Minister of Finance may introduce money
bills in Parliament, and it also has to be a separate bill from the primary
legislation (i.e. Diamond Act).
The Diamond Export Levy Bill's main objective is to support the local
beneficiation of rough diamonds. The beneficiation of rough diamonds is seen as
important to encourage the development of the local economy, skills and
employment creation. The Bill proposes a five percent export levy on rough
diamonds that should contribute towards local beneficiation, but is low enough
so as not to unduly encourage smuggling.
Tax rate and base
The export levy of five percent replaces the current 15 percent export levy
as provided for in the Diamonds Act, 1986. The five percent levy applies to all
rough (natural unpolished) diamonds that are exported. Synthetic human made
diamonds are exempted from this tax. The levy amount will be equal to five
percent of the value of a rough diamond exported, as specified on a return
described in Section 61 of the Diamonds Act, 1986, or of the value as assessed
by the Diamond and Precious Metals Regulator described in section 65 of the
Diamonds Act, 1986.
Relief measures
The Bill contains relief measures that may offset the five percent levy in
full or in part. These relief measures are designed to deal with weaknesses
previously arising from similar relief measures in the Diamonds Act and at the
same time minimise / eliminate any potential distortions and / or unintended
negative consequences of the export levy.
Only producers (or dealers who form part of the holding company of a
producer) may take advantage of the relief measures. Independent dealers,
cutters, and polishers will not be able to access the relief measures.
An import credit
A producer is entitled to receive a credit for imported rough diamonds. The
credit will offset (in full or in part) a producer's export duty liabilities.
The credit is calculated on the same basis as the export duty; five percent of
the value of rough diamonds imported. The Commissioner of the South African
Revenue Service (SARS) may, in determining the value of any imported rough
diamond, adjust the value to reflect an arm's length price with respect to that
diamond, after consultation with the Diamond and Precious Metals Regulator.
Ministerial exemption in terms of the Diamonds Act
The Minister of Minerals and Energy has the power to exempt a producer from
the requirement to offer its rough diamonds intended for export, for sale at
the Diamond Exchange and Export Centre. The granting of such an exemption by
the Minister of Minerals and Energy will be accompanied by an automatic
exemption from the five percent export levy. An objective set of criteria for
granting an exemption to offer rough diamonds intended for export at the
Diamond Exchange and Export Centre by the Minister of Minerals and Energy will
be spelled out in regulations issued in terms of the Diamonds Act.
Ministerial exemption at the Diamond Exchange and Export Centre
The Minister of Minerals and Energy may also exempt a producer from the five
percent export levy if:
1. a producer's activities are supportive of local diamond beneficiation,
or
2. the producer has a annual turnover of less than R10 million, a small miner,
and such a producer has offered his or her rough diamonds for sale at the
Diamond Exchange and Export Centre but there were no local buyers.
However, the diamonds must subsequently be sold for an amount at least equal
to the reserve price at which such diamonds were offered at the centre. These
conditions preserve South African's "right of first refusal" with respect to
bidding on any rough diamond intended for export.
Administration
The Bill provides for two sets of levy payers, producers (diamond miners,
including a dealer that forms part of the same group) and non-producers
(dealers, cutters and polishers).
Producers must register with the South African Revenue Service and pay their
export levies twice per year (every 6 months) and non-producers must pay the
full levy when exporting rough diamonds. Producer-level registration is
critical because most diamond smuggling stems from record defects at the local
producer-level.
The definition of producer (contained in section 1 of the Bill) extends
beyond holders of mining rights to reflect the economic reality of group
operations, which often separate mining from sales.
Public comments and tabling of Bill
The comment period for the Bill closes on 31 October 2006. The Bill will be
submitted to Parliament for tabling by 2 November 2006.
The bill is available for public comment on http://www.treasury.gov.za and comments should
be sent to will.bautista@treasury.gov.za.
Enquiries:
Thoraya Pandy
Tel: (012) 315 5944.
Issued by: National Treasury
11 October 2006
