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Technical News: Budget Proposals Presented in Parliament

14 March 2013   (0 Comments)
Posted by: Erich Bell
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SAIT’s budget proposals were presented in Parliament last week Wednesday. SAIT congratulated the Minister on a rational budget that took cognisance of the sluggish economy and that used the National Development Plan (NDP) as its point of departure.

The areas covered in the SAIT proposals included:

·Small business relief measures – praise for the increase in turnover limit for a qualifying small business corporation to R20 million (from R14 million) and for the increase in tax savings for these entities. Despite this a call was made to increase the turnover level to R50 million to be in line with the DTI’s proposed changes to the BBEEE categories of exempt micro enterprises and qualifying small businesses. A call was also made to introduce a Minister of Small Business whose primary objective would be to assist and grow the number of small businesses in South Africa (as they are the engines of employment) and by so doing centralise and pin point the responsibility for this crucial sector of South Africa’s economy;

·Social businesses  - the need for special recognition  in the income tax act was highlighted;

·Government and the private sector’s debt – both very high and need to be monitored closely by ensuring that there is accountability for all actions taken/not taken;

·The tax review – was welcomed in the hope that it would inform a new strategy which can achieve a more balanced democracy as stipulated in the National Development Plan;

·Youth employment tax incentive and SEZ employment incentives – applauded but the link to the tax threshold was questioned and possible expansion of these incentives was suggested.  As the exact details of the incentives were not given, it was pointed out the effectiveness of these incentives ultimately rests on the administrative requirements involved (they must not be significant) and the cost effectiveness of the incentives (for both government and employers alike).

·Other technical issues discussed were:

VAT registration – currently very cumbersome so attention in this area is very welcome;

VAT registration for foreign companies – feasibility was questioned;

Taxation of trusts – reasons for the proposed termination of the conduit-principle were not provided and the fairness thereof was questioned by SAIT;

Withholding taxes on service fees paid – unexpected announcement and the extent of the effect  not yet know;

Cross issue of shares – changes to positively affect BEE transactions welcomed;

Gateway subsidiary/Treasury company – proposal to treat a single local subsidiary as a non-resident company for SARB purposes welcomed;

Introduction of tax-preferred savings and investments – welcomed however the ultimate success of these proposals is doubted due to the inability of the average South African to save as a result of increase in standard living expenses;

Retirement reforms – the harminisation of the tax treatment of pension, RAF and provident fund contributions as well as the roll-over of the contributions in excess of the annual caps to future years were favourably received;

Increase in fuel and environmental levies – it was suggested that income from these taxes should be ring-fenced and used solely for the purposes for which they were raised;

Expansion of social grants and NHI – the increase in the social grants are clearly needed but the ultimate sustainability of providing these grants is not possible so alternatives need to be considered urgently. The sentiments of President Zuma were echoed by SAIT in that South Africans are urged to become self-sufficient by productively using the land to prevent them from relying on the social grants;

Gambling tax – uncertainty whether this will assist in discouraging excessive gambling in South Africa was raised;

Exemptions for bursaries – welcomed in light of the country’s poor education outcomes.

In light of the poor South African educational system and high rate of teacher absenteeism, education was highlighted by SAIT as being critical to the future of South Africa.

Source: Sharon Smulders


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