NEW EXPORT TAX ON SCRAP METAL PROPOSED
On 20 February 2019, Finance Minister Tito Mboweni announced that the National Treasury will work with the Department of Trade and Industry and the Department of Economic Development to explore the introduction of an export tax on scrap metal.
In 2013, the Minister of Economic Development published a trade policy directive on the export of scrap metal, which provides that metal recyclers must not export scrap metal before offering it to local users of scrap at a 20% discount. The policy directive was intended to promote local industrialisation and the beneficiation of local scrap metal, given major job losses and de-industrialisation in the industry.
Prior to the publication of the policy directive, the Department of Economic Development reported a significant increase in the export of raw material to the detriment of the local scrap industry. Export levels have since dropped, and local foundries and mini-mills have reported an improvement in the supply of scrap metal.
The SA Metal Group sought to challenge the policy directive in a series of unsuccessful court cases, culminating in a ruling by the Constitutional Court in 2017 that the policy is legitimate and legal. In the wake of the judgment, COSATU called for a 50% export tax on scrap metal.
No details have been released as to the proposed rate of the tax, but the initiative is welcome. In addition to revenue collected directly from the levy of the export tax, incidental job-creation may result in an increase tax revenue from employees’ tax (PAYE).