South Africa will not impose a windfall tax on synthetic fuel producers such as Sasol and PetroSA, the National Treasury said on Monday. "(The) government has also decided not to proceed with a tax on the windfall profits earned by existing synthetic fuel producers in the interest of a conducive environment for additional investments in domestic fuel security," the National Treasury said in a statement.
Shares in Sasol - the world's biggest producer of synthetic fuel from coal, with output of 160,000 barrels per day - jumped as much as 8.81 percent to 284 rand after the announcement. A government taskforce proposed a possible tax on windfall profits and an incentive arrangement for new investment in liquifuel production capacity.
Finance Minister Trevor Manuel, who said in February he would consult the oil industry on the proposed windfall tax, told reporters in Pretoria that the government wanted to be fair.
"We want to be fair, we want to avoid (a) retrogressive tax law," Manuel said. The National Treasury said interventionism by the government in the industry should focus on expanding fuel supply capacity.
"We accept that at this stage that public interventions must focus on facilitating the expansion of liquid fuel supply capacity in the interest of domestic energy security and macroeconomic stability," the Treasury statement said.
The taskforce had proposed that an additional tax on existing synthetic fuel production volumes would kick in from a level for international oil prices of about $45 to $55 per barrel of crude. The team also recommended a progressive incentive scheme for investments in new synthetic fuel and biofuel plants, including tax credits at low oil prices and tax at high prices.
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