Finance Minister Pravin Gordhan has told parliament last week that the nominal tax revenue collected for the first three months of fiscal year 2009/10 is R13.14bn below the amount collected for the same period last year, and is even lower when compared to what was budgeted.

In response, Matthew Lester this week analysed the tax base and came up with the suggestion to increase super tax beyond 40% (click here for the Sunday Times article). In the current political landscape, the new administration will certainly be applauded by Vavi and Malema if this becomes a reality. And that is exactly why I predicted we will see an additional super tax band of 42% in the budget speech (click here for the Sake24 article). This prediction was not based on some sort of logical tax argument – but rather on the change in government. With the subsequent decline in revenue collection and the prediction of a R60bn shortfall in revenue this year, this possibility now seem more plausible.

In his analysis, Lester suggests, amongst others, that estate duty and donations tax be abolished and CGT be increased to compensate the fiscus. This seem too good to be true – and it certainly is.

Now what can be done? A suggestion to the honourable Minister of Finance is to appoint a Commission on Taxation from experts in the tax community to review the structure, efficiency and appropriateness of the South African tax system. Support for such a Commission can be found in Ireland, where a Commission of Taxation was established in 2008 (see www.taxcommission.ie) with its report due this week. But then again, history has shown that governments do not implement recommendations from Commissions...

Yours truly,
Stiaan Klue
Chief Executive

Finance Minister Pravin Gordhan has told parliament that the nominal tax revenue collected for the first three months of fiscal year 2009/10 is R13.14bn below the amount collected for the same period last year, and is even lower when compared to what was budgeted to collect as announced in February 2009.

Since the increase of the compulsory value-added tax (VAT) registration threshold from R300 000 to R1 million with effect from 1 March 2009, a number of vendors are considering deregistering from VAT. If the total value of taxable supplies made by the vendor during the preceding 12 months did not exceed R1 million and there are no reasonable grounds for believing that a vendor’s taxable supplies during the next 12 months will exceed R1 million, the vendor is not obliged to be registered for VAT and may voluntarily deregister.

Those who regularly peruse financial statements will be familiar with the concept of ‘provision accounts’ or ‘provisions’. From a legal perspective, these ‘provisions’ may usually be said to relate to conditional liabilities, namely, liabilities that will arise upon a condition being met (eg, an employee still being employed by a company on the date on which bonuses are awarded). For tax purposes, they represent amounts that a taxpayer has not yet ‘actually incurred’ and are therefore not yet tax deductible against income.

With employees struggling to make ends meet in these difficult times, an increased after-tax remuneration would be welcomed. The Income Tax Act (the Act) provides for certain employment-related benefits to be exempt from normal tax. These concessions (exemptions) are set out in s 10. But in the Seventh Schedule certain fringe benefits are given a ‘nil’ value.

In each of two income tax returns submitted to SARS for assessment, the taxpayer had included an amount paid to him pursuant to two agreements which subjected him to restraints of trade. SARS disallowed the amounts, finding that the agreements from which they stemmed were not genuine restraint of trade agreements and that in reality the payments made pursuant thereto constituted remuneration for the taxpayer's services and therefore amounts subject to tax.

The official launch of the UK based Advanced Diploma in International Taxation will be held at Edward Nathan Sonnenbergs Inc on 17 September 2009. The Chief Executive of the UK Chartered Institute of Taxation, Peter Fanning, will be present to unveil the qualification with SAIT Chief Executive, Stiaan Klue.

The Institute support members during the current economic downturn. The Membership department have developed programs to ensure unemployed Members continue to have access to professional development and continue their professional advancement.

SARS published an updated quick guide to binding private rulings. The Guide is intended to promote the understanding of the Advance Tax Ruling System (ATR System)and to assist in filing an application for a binding private ruling (BPR).

SARS released an updated tax brochure for non-residents.

Representatives of almost 100 governments have been invited to meet in Los Cabos, Mexico, on 1-2 September to decide next steps in a global campaign to improve transparency and exchange of banking and ownership information for tax purposes.