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Deloitte Pre-Budget Commentary

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Personal taxes - The fragile state of South Africa’s golden goose

By: Anthea Scholtz, Partner, and Claudia Gravenorst, Senior Manager, Deloitte Africa Tax & Legal

The 2020/21 National Budget will continue to have an underlying dual
challenge, namely that we not only need to grow our economy, but very
importantly, we also need to grow our economy inclusively – so that more South
Africans can participate in it and can benefit from it. 

Changing the trajectory of South Africa’s economic environment

By: Hannah Marais, Associate Director: Africa Insights, Deloitte Africa

South Africa has been stuck in a low growth rut for the last decade. The country’s growth has lagged behind many emerging markets and most of its African peers (some countries, such as Ethiopia, Ghana and Rwanda, have doubled their economies in size, growing 7% or more on average this past decade).

Is a reduction in the corporate income tax rate on the cards?

By: Le Roux Roelofse, Director: Global Business Tax Services and National Technical Leader, Deloitte Africa Tax & Legal 

South Africa’s CIT rate is uncompetitive when measured against some of our major trading partners. In its 2018 Budget Review, National Treasury noted by way of example that the United States has reduced its rate from 35% to 21%, the United Kingdom from 30% to 19%, the Netherlands from 26% to 21% (currently 25%) and  China’s rate is 25%.

The impact on the fiscus of the country’s sluggish economic growth

By: Botlhale Joel, Director: Global Business Tax Services and Financial Services Industry Leader, and Kabelo Malapela, Director: Global Business Tax Services and Financial Services Industry Tax Specialist, Deloitte Africa Tax & Legal

While the majority of South Africans were battling load-shedding woes and heading off for their long anticipated and well-earned summer vacations in December, the South African Revenue Service (SARS) published its 12th annual Tax Statistics for 2019. The report is compiled together with National Treasury and covers all taxes, from corporate income tax, all the way to the Health Promotion Levy or what most of us know as “sugar tax”.

The implications of the recently published NHI Bill and what it means for the country

By: Ashleigh Theophanides, Director: Life Sciences and Healthcare Industry Leader, and Rachaad Omar, Associate Director: Life Sciences and Healthcare, Deloitte Africa

South Africa’s National Health Insurance (NHI) Bill 2019, was introduced to the National Assembly on 8 August 2019 and is bound to create debate.  It is expected that there will be various areas of uncertainty created by this Bill. It does, however, create a roadmap for the way forward on NHI with greater detail on the operational processes and structure of NHI, making this proposed system seem less of a pipe-dream and more of a reality.

Is another VAT increase looming?

By: Severus Smuts, Director: Indirect Tax Leader, Deloitte Africa Tax & Legal

It has been two years since the Minister of Finance announced a 1% increase of value-added tax (VAT) as part of government’s efforts to contain a budget deficit. However, in light of the current financial demands, has this VAT rate increase made a big enough financial impact or is a big deficit once again on the cards? 

A new tax is born

By Suzanne van der Merwe, Director: Indirect Tax, Deloitte Africa Tax & Legal

In South Africa, like many other countries, we are now familiar with value-added tax (VAT) on electronic services, introduced in 2014. The measures aim to tax consumption of services provided electronically from outside South Africa to a South African recipient.

Transfer pricing - Important considerations for minority shareholders

By Billy Joubert, Director: Transfer Pricing Leader and BEPS Specialist, Deloitte Africa Tax & Legal

We have, in practice, encountered many situations where transfer pricing rules apply to local entities which are majority owned by a foreign shareholder, but with a minority local shareholder or shareholders. This scenario happens regularly in South Africa, significantly due to our BEE rules, but is by no means unique to South Africa.

State of carbon tax

Raynard Maneschijn, Senior Manager: Global Investment and Innovation Incentives, Carbon Tax Specialist, Deloitte Africa Tax & Legal

South Africa’s carbon tax regime is beginning to take shape, with several sets of legislation being finalised or published for public comment in the past few months. In this article, we provide our analysis on the various changes and new information that has been made available.

Illicit trade flows: The broader impact on supply chains

By: Riaan Smit, Associate Director: Global Business Tax Services, Deloitte Africa Tax & Legal

Reporting on illicit trade flows often focus on the fiscal losses that results from the illicit trade flows, such as the amount of excise revenue lost through the smuggling of cigarettes or alcohol products. Other topics that are considered include the proliferation of organised crime and health risks such as counterfeit medicines.

Good faith does not exempt taxpayers from paying understatement penalties to SARS

By: Hermana Mausling, Senior Manager: Tax and Mia Heymann, Assistant Manager: Legal, Deloitte Africa Tax & Legal

The Tax Administration Act, 28 of 2011 (the TAA) contains an understatement penalty regime which could, at times, result in severe penalties for taxpayers. Broadly speaking, where a taxpayer has understated its tax which lead to any prejudice to the South African Revenue Service (SARS) or the fiscus, it will be liable for an understatement penalty as calculated in terms of the understatement penalty percentage table in section 223 of the TAA.

Oil and gas developments in South Africa

By: Moray Wilson, Associate Director: Global Business Tax Services and Oil, Gas &
Chemicals Sector Industry Leader – South Africa, Deloitte Africa Tax & Legal

The oil and gas industry has the potential to provide a much needed boost to the South African economy, with the prospect that the development of new projects in the sector will provide critical support to improving energy security for the country (including electricity generation through gas-to-power technologies), will stimulate business activity and provide employment opportunities.

Can government further promote share ownership through employee share plans?

By Matthew Hart, Associate Director: Global Employer Services, Deloitte Africa
Tax & Legal

Income tax legislation for qualifying section 8B broad-based employee share plans can benefit from international models to promote share ownership.
For many years National Treasury has amended the Income Tax Act to fine tune the taxation of general employee share plans under section 8C as it is perceived that tax leakage continues in this space.

Broadening the tax base by limiting tax deductions for interest charges

By: Lance Collop, Associate Director: Global Business Tax Services, Deloitte Africa Tax & Legal

There is a strong possibility that the Minister of Finance, Mr Tito Mboweni, will announce an intention to broaden the tax base by expanding the rules that limit the deductibility of interest, possibly by introducing a general cap on all interest incurred to a certain percentage of taxable profits in a given year.

Will the personal tax rate be increased?

By: Jaco la Grange, Associate Director: Global Employer Services, Deloitte Africa Tax & Legal

Although tax receipts are lower than expected, an increase in the marginal tax rate for individuals is not expected. This would be in line with findings of the Davis Tax Committee that an increase in the top marginal tax rate would not yield substantial additional tax revenue and may well provide further impetus to increasing the number of individuals emigrating from South Africa.

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