Abstract
The oil and gas sector is advantageous to South Africa. However, the country’s oil and gas reserves are minimal in relation to many other countries, reducing attractiveness to prospective investors. In the aim of promoting investment in the oil and gas sector of South Africa, attraction should be improved by other means, such as an alluring regulatory environment, including the taxation regime.The research conducted in this study aimed to determine whether the income tax legislation in South Africa provides a meaningful incentive for oil and gas companies to compete for international investment in this industry without unnecessarily compromising the State’s share of wealth from the industry. A literature review established the use and characteristics of meaningful tax incentives. The incentives contained in South Africa’s oil and gas tax environment were evaluated to determine whether the incentives can attract investment to the sector.Findings indicate that the incentive contained in the Tenth Schedule generally meets identified characteristics of meaningful tax incentives, enabling South Africa to lure investment to the sector. The interaction between this incentive and the remainder of the legislation, however, reduces the stability afforded to investors and may create uncertainty in the application of the incentive. Also, an apparent lack of monitoring of the regime may result in the impact and necessity of the incentive not being determinable, especially if the investor environment were to be affected by new discoveries.
Highlights
F ossil fuels, such as coal, uranium, liquid fuels, and gas is abundant in South Africa
In light of the importance of and challenges arising from the South African oil and gas industry as set out above, the purpose of this article is to evaluate the provisions of the Tenth Schedule critically from the perspective of providing a meaningful incentive to potential investors
Paragraph 2 provides investors with the assurance that the tax imposed in respect of the taxable income of a petroleum or gas company will not exceed 28%, which is the current tax rate that applies to all companies in South Africa
Summary
F ossil fuels, such as coal, uranium, liquid fuels, and gas is abundant in South Africa. The long -term objectives of the State, need to ensure that the nation’s oil and gas resources are not depleted without compensating the State, as custodian of these resources under section 3(1) of the Minerals and Petroleum Resources Development Act No 28 of 2002 (hereafter referred to as ‘the MPRDA’) The achievement of this objective, while at the same time providing meaningful incentives to investors, require a fine balancing act by the State. In light of the importance of and challenges arising from the South African oil and gas industry as set out above, the purpose of this article is to evaluate the provisions of the Tenth Schedule critically from the perspective of providing a meaningful incentive to potential investors. The article concludes with the findings of the evaluation and recommendations based on the evaluation in part 5
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
