Export tax on scrap metal under the spotlight

Publication notice of the proposal on export taxes on scrap metal for public comment. The effective date of implementation of the envisaged Export Tax on Scrap Metal will depend on the parliamentary tax process during 2020. This follows the announcement made by the Minister of Finance in the 2020 Budget Review regarding the introduction of export taxes on scrap metal and the publication by National Treasury on the 6th March 2020 for consultation to be the basic approach for such tax.

The economic development department revealed this during a briefing in parliament on its 3rd quarter report for 2019/20. Comment on the proposed export duty on ferrous and non-ferrous waste and scrap was sought in October 2019.

According to the notice, the trade and industry minister, Ebrahim Patel, has directed the International Trade Administration Commission of South Africa to investigate and advise on whether it would be appropriate to replace the existing Price Preference System (PPS) regulating the exportation of ferrous and non-ferrous waste and scrap metal with an export duty on scrap metal. (Castings SA December 2019 issue – ITAC proposes export duty on ferrous and non-ferrous waste and scrap – http://castingssa.com/itac-proposes-export-duty-on-ferrous-and-non-ferrous-waste-and-scrap/).

The PPS was introduced in September 2013 for an initial period of five years and extended twice, firstly until 30 June 2019 and, secondly, until 31 March 2020.

The department recently called for comment on a proposal to extend the Policy Directive by nine months from 1 April 2020 until 31 December 2020 to enable treasury and the trade and industry and economic development departments to finalise the implementation of an export tax.

In Budget 2019, the finance minister, Tito Mboweni, announced that national treasury and the departments will collaborate to explore the introduction of an export duty on the exportation of scrap metal to replace the PPS.

Proposed export duties include R1 000 per ton on ferrous (including stainless steel), R3 000 per ton on aluminium and R8 426 on red metals.

The National Treasury notice of 6 March 2020 reads:

“Following the announcement made by the Minister of Finance in the 2020 Budget Review regarding the introduction of export taxes on scrap metal, the National Treasury today publishes for consultation the basic approach for such tax. This proposal is related to the phasing out of the current price preference system for scrap steel, and follows the recommendations from a feasibility study conducted by the International Trade Administration Commission (ITAC).”

“Given the need to consult all stakeholders, including possible winners and losers, the consultation will take place in two phases. The first phase will be a shorter and broader public comment process on the objective, implementation, functioning and economic and financial impact of such an export tax, including the level of rates and base for such a tax. Comments on the impact to current firms and industries, and the implications for the tax and trade system will also be welcome, as well as comments on strengthening the administrative capacity of SARS to implement such export taxes.”

“The first phase will be followed by a more intensive second phase of public comment, on the proposed legislative provisions to give effect to specific export taxes on scrap metal, to be included in the 2020 draft Taxation Laws Amendment Bill (TLAB). The first phase will commence immediately and run up to the end of April 2020, while the second phase will commence with the publication of the Taxation Laws Amendment Bill in mid-July and run up to the end of August/September 2020.”

“To facilitate the first phase of consultation, National Treasury will hold an initial briefing on 12 March 2020 (A later announcement changed this date to 25 March 2020) with all interested stakeholders on the proposal to introduce export taxes on scrap metal. The Department of Trade, Industry and Competition and other key governmental stakeholders will also attend this meeting.”

Written comments on the proposal on export taxes on scrap metal were due to be submitted by no later than 25 March 2020. In a later announcement on 10 March 2020 this date was changed to 9 April 2020.

Upon receipt of the comments and submissions on the proposal on export taxes on scrap metal, the National Treasury (working with the Department of Trade, Industry and Competition and other governmental stakeholders) will engage directly with stakeholders until the end of April through technical workshops to discuss the comments received. Thereafter, the proposed provisions on the export taxes on scrap metal will be developed for inclusion in the TLAB, which will be published in mid-July 2020 for public comment.

Further, as part of the TLAB consultation process, National Treasury will also engage with stakeholders through the usual workshops held after the receipt of written comments on the draft Bill. The Standing and Select Committees on Finance in Parliament are expected to make a similar call for public comment, and convene public hearings on the TLAB before the formal introduction of the Bill in Parliament. Thereafter, a response document on the comments received will be presented at the parliamentary committee hearings, after which the 2020 draft Taxation Laws Amendment Bill will then be revised, taking into account public comments and recommendations made during committee hearings, before the Bill is tabled formally in Parliament for consideration.

The proposal on export taxes on scrap metal is included in Chapter 4 of the 2020 Budget Review, which can be found on the National Treasury (www.treasury.gov.za) website.