| Wed 8 Jun 2005, 11:36 | | SARS demands Mittal cough up for R1,34bn assistanc |
|
SARS demands Mittal cough up for R1,34bn assistance deal
Carli Lourens
--------------------------------------------------------------------------------
E-Mail article Print-Friendly
Trade and Industry Editor
MITTAL Steel SA may have to cough up about R400m in tax after it received official notice from the South African Revenue Service (SARS) yesterday challenging the steel maker’s R1,34bn payment to its majority shareholder.
Mittal Steel said it would not accept SARS’s view.
The steel company would appeal against the assessment, as it believed the payment was revenue expenditure in nature and hence tax deductible, said Mittal Steel spokesman Tami Didiza yesterday.
SARS argues that the payment is capital in nature.
Mittal Steel made the payment to its major shareholder, the international Mittal group, in terms of a business assistance agreement that saw the global group help the local steel maker achieve savings of R1,98bn.
The steel firm warned earlier that SARS intended challenging the payment but was still awaiting official notice from SARS to this end.
It said at the time that its contingent liability on this account was R403m.
SARS large business centre GM Edward Kieswetter said that if Mittal Steel disputed the receiver’s view, dispute resolution would be entered into.
Analysts were not too concerned about the SARS challenge against the steel maker because it has put in a solid performance over the past year or so.
Mittal Steel said in April that it had more than doubled profit in its first quarter ended March, compared with the corresponding quarter last year.
The company’s headline earnings jumped 136% to R1,58bn.
Meanwhile, Bloomberg reported yesterday that the global Mittal group could build a $6,9bn steel mill and mine in India’s Jharkhand state in order to tap iron-ore deposits amid a surge in raw material costs.
Mittal, the world’s biggest steel maker, would submit a proposal for the plant within the next two months, Arun Kumar Singh, Jharkhand’s secretary of mines and geology, said.
Nicola Davidson, a spokeswoman for Mittal in London, said talks with the government were continuing and no decision had been made.
“Global steel makers have realised it’s a good time to set up operations in India to tap demand and lock in raw material supplies,” said AS Firoz, an economist at India’s steel ministry in New Delhi.
Raw material costs for steel makers have surged, with iron-ore prices jumping more than 70% in the past year.
The plant would be the first built by billionaire owner Lakshmi Mittal in his home country.
Mittal Steel SA’s share price closed 3,54% lower yesterday at R48,45.
The share has dropped steeply this year from a high of R66,85 in March, amid signals of a downtrend in the global steel market. The global Mittal group’s share price has dropped about 33% in the year to date. With Bloomberg
