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RAPAPORT...South Africa's National Treasury released a statement October 11, 2006, regarding the Diamond Export Levy Bill, which is intended to be a separate bill from Diamond Act legislation. Public comment on the Bill closes October 31, 2006, and then the Bill will be submitted to Parliament for tabling by November 2.
The Diamond Export Levy Bill’s main objective is to support beneficiation, which encourages development by adding skills and employment opportunities in South Africa. The Bill proposes a 5 percent export levy on rough diamonds that should contribute towards local beneficiation, but is low enough so as not to unduly encourage smuggling. South Africa defines "rough" as any enhanced natural diamond or any diamond that is not polished as defined under the Diamonds Act, regardless of whether or not the diamond was recovered in South Africa, but the provision does not include synthetic diamonds. The export levy of 5 percent, which would be based upon value of the rough, replaces the current 15 percent export levy under the Diamonds Act of 1986. Relief measures The bill contains relief measures --which may offset the 5 percent levy in full or in part-- to compensate for weaknesses arising from similar measures in the Diamonds Act and at the same time minimize 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. 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; 5 percent of the value of rough diamonds imported. The commissioner of the South African Revenue Service 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 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. 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. The Minister of Minerals and Energy may also exempt a producer from the 5 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 where diamonds were offered at the Centre. These conditions preserve South Africa’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 extends beyond holders of mining rights to reflect the economic reality of group operations, which often separate mining from sales.
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