|Budget 2014: A static budget with little future guidance|
As expected, the nation received a static budget speech today from Minister Gordhan.
With reports of inefficiencies and wasteful expenditure in the media of late, Prof Smulders, Head of Tax Technical and Policy at the South African Institute of Tax Professionals (SAIT) states that “it was disappointing that no quantitative feedback on the effectiveness of the “waste-cutting” measures proposed last year were provided”.
From a tax revenue and cost perspective, no bold and decisive plans were announced to improve future economic growth with the speech focussing on job creation and small and medium enterprise development.
Small and medium business development
Government has heeded two of the Davis Committee’s recommendations to ease the compliance burden of small businesses. The first is to simplify the requirements and reduce the thresholds and tax rates of the turnover tax regime for micro enterprises. The second is to replace the small business corporation (SBC) regime with a refundable tax compliance credit.
No further details on this credit were announced. Prof. Smulders, questions whether these changes will be sufficient to motivate tax compliance in the informal sector. “The take-up of the turnover tax regime in total, and not just in the tax industry for which it was designed, was not a success. The proposed changes will assist in increasing registrations, but more emphasis should be placed on marketing the incentive and on enforcement of non-compliant taxpayers”.
Furthermore, grants received by small and medium sized enterprises will be tax exempt, irrespective of the source of the funds. Consideration will also be given to providing tax relief to organisations promoting small enterprise development through grants. In the hopes of reviving the failing venture capital company regime, the government is considering various changes to this regime to enhance its flexibility.
The success of the employment tax incentive is already evident with 56 000 beneficiaries already having benefited from the youth employment tax incentive in the first month of operation. Despite this success, it is important to note that the refund system will only become effective during the last quarter of 2014.
Other key announcements are:
SAIT commends the Minister for taking steps to create a simplified tax and foreign exchange framework for companies that trade with Africa and for promoting investment in the private and public sectors. These initiatives will create a holistic framework for investment which is in line with the National Development Plan framework and places investment in the centre of the country’s economic growth plan.
Something still missing
Ms Emmerentia Fischer, SAIT’s Head of Operations, highlights the areas mentioned in previous budgets where no further announcements have been made. This once again emphasises the unsaid portion of the budget speech and the anticipation of what can be expected in the coming months……..
As expected this budget delivered no fireworks but it is the unsaid portions of the budget speech that is of concern. No sparks were lit as to how the economic growth and budget deficit expectations are going to be achieved.