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SIR ERNEST OPPENHEIMER
the
justification being in part the view that the 'ability to pay' of the
industry and its owners makes this justifiable and possible, in part
the view that as gold is a 'wasting asset' upon which the economic life
of the country, and therefore its taxable capacity, cannot rely
indefinitely, it should contribute as much as possible while 'the
going' is still good. Moreover, the industry has from time to time
gained what might be called a 'windfall' increment of profit from
monetary changes which have raised the receipts from gold sales without
raising costs to a proportionate extent, so that the retention of part
of these windfall profits did not seem inherently unjust.
Against
these considerations must be set others. The gold resources of the
country may indeed be a 'wasting asset'; but the rate of exhaustion is
itself affected by the level of taxation, both by affecting the grade
of ore which it is worth while to mill in existing mines and by the
discouragement offered to the exploitation of new low-grade mining
propositions. Moreover, in so far as high tax rates cut into
profitability, they deter the entry of 'risk capital' into mining and
so again limit the further exploitation of known resources by confining
production to a higher grade of ore. Inevitably, it was arguments such
as these winch were deployed by Ernest Oppenheimer and, indeed, by the
spokesmen of the industry generally.
In
1935 the Union Government had appointed a departmental committee on
mining taxation; it reported in the subsequent year, and its
recommendations were accepted by Government. It gave Ernest Oppenheimer
the opportunity of discussing the problem at some length when he spoke
to the shareholders of Anglo American Corporation on 8 May 1936:
.
. . The recommendations in general, which followed the lines of the
suggestions made by the Johannesburg Consolidated Investment Company
and ourselves, were accepted by the Minister of Finance, and resulted
in a simplified form of taxation, which must be considered a vast
improvement on the various methods of taxing the profits from gold
mining since 1933. In principle, the new taxation will result in
low-grade ore being taxed at a lower rate than high-grade ore. In this
way it ensures the mining of available marginal ore, while it gives
greater security to shareholders in potential producers. Should the
value of the ore in a new mine prove to be below the earlier
expectations, the shareholders receive a larger proportion of the
profit. On the other hand, should the reverse prove to be the case, the
shareholders pay a larger proportion to the Government, and so the
speculative aspect of mining enterprise is reduced. The rate of tax is,
however, still very high, although the danger of this aspect was
strongly emphasized by the depart-
