MINING
Rehabilitation funds tax plan leaves regulations gap
Regulations and draft tax legislation not fully aligned
The government’s proposed new tax measures to curb the abuse of mining-rehabilitation funds represent a missed opportunity to clarify differences between tax law and mining regulations. The National Environmental Management Act of 1998 places the responsibility for remediating environmental damage, pollution or ecological degradation arising from mining operations on mining companies as the holders of prospecting or mining rights. Mining companies have to make financial provision for the rehabilitation of the environment, using financial guarantees, cash payments to a Department of Mineral Resources bank account or cash payments to special purposes companies or trusts (mining rehabilitation funds). Tax relief is available to mining companies for payments to mining rehabilitation funds: the Income Tax Act gives a company a tax deduction for cash payments to these funds. It also exempts the growth in these funds from tax, provided the mining company complies with the requirements of s...
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