Honourable Speaker Mister President Deputy President Cabinet Colleagues and Deputy Ministers Governor and Governor-Designate of the Reserve Bank MECs of Finance
Author: Nyasha Musviba
Nene vows to protect the poor
The government has kept its word on protecting the poor and vulnerable amid a tight fiscal space that has forced Nhlanhla Nene to cut expenditure in certain areas of the government. Nene said that, despite the need to reduce government spending, he was mindful of the importance of keeping the social services net open to accommodate the poor. In the Medium-Term Budget Policy Statement, Nene said that the government would allocate just under R500 billion in the social protection cluster during the medium term. “Social grants, which are expected to reach 17.3 million people by 2017/18, will account for nearly 85 percent of this spending,” said the statement.
Nene slams brakes on spending
Author: Wiseman Khuzwayo (IOL) Finance Minister Nhlanhla Nene yesterday announced measures to try to rein in spending, stabilise government revenue and narrow the budget deficit. Presenting his first Medium-Term Budget Policy Statement since his appointment in May, Nene said South Africa faced the challenge of having to do more with less, adding that this was a difficult time as growth in many countries had slowed and the economic outlook was uncertain. By announcing a bid to restrain spending, Nene aimed to send a strong message to the capital markets and the credit ratings agencies which have put South Africa under a microscope amid deterioration in the country’s fiscal position as tax revenue slows, debt levels rise and as growth continues to be elusive.
Mini-budget: SA economists react
Author: Peter Attard Montalto, Emerging Markets economist, Nomura “South Africa has gone for austerity (-ish) and tax hikes to achieve the same projected consolidation path after a sharp downward revision in the growth outlook. This conservative fiscal stance can only be achieved politically given the argument that the Treasury has won around increasing space for grants to the poor and more left-wing microeconomic policies at the expense of tighter fiscal policy overall. “However, the Medium Term Budget Policy Statement (MTBPS) puts the likelihood of short-term downgrades from the agencies in more doubt, though in the medium run Moody’s (and others) will lower the rating. Eskom support lacks much of the required additional details, though the fabled debt-equity conversion has been raised along with equity asset sales, as expected.
Venture capital companies: part 2 – the investors
Author: by Mansoor Parker Introduction This is the second in my series of articles on venture capital companies. In this article I look at the conditions relating to the investors. In particular, I look at the way the investors are permitted to hold their investments in the venture capital company (‘VCC’) in order to qualify for the tax concessions available to them.
The assumption of rehabilitation liabilities as consideration given on the acquisition of mining property and capital assets
Author: Andre Vermeulen – Tax Associate – ENSafrica During December 2013, SARS released a draft discussion paper in which it set out its application of the relevant tax law, in relation to the tax treatment of the purchaser and seller, with regard to the assumption of contingent liabilities as part settlement of the purchase price of assets acquired as part of a going concern. SARS states that the document was prepared in light of recent judgments delivered by local and foreign courts as well as numerous requests for clarity regarding the income tax treatment, of both the seller and the purchaser, in respect of the assumption of contingent liabilities as part settlement of the purchase price of assets disposed of and acquired.
Reportable arrangements – proposed replacement of the existing notices for purposes of sections 35(2) and 36(4) of the Tax Administration Act No. 28 of 2011
Authors: Robert Gad and Megan McCormack – ENSafrica Section 35(2) of the Tax Administration Act No. 28 of 2011 (the “TAA”) currently provides that an arrangement will be reportable, inter alia, if it is listed as such by the Commissioner for the South African Revenue Service (“Commissioner” or “SARS”) by public notice, and if the Commissioner is satisfied that the arrangement may lead to an undue tax benefit. Such inclusions are, however, subject to the provisions of section 36 of the TAA, which inter alia provides that the Commissioner may determine an arrangement to be an excluded arrangement by public notice if he is satisfied that the arrangement is not likely to lead to an undue tax benefit.
Pitfalls arising from the financial provision for mining rehabilitation
Author: Gerdus van Zyl – Tax Advisor at ENSafrica Mining companies generally make financial provision for rehabilitation by virtue of rehabilitation trusts or financial guarantees through a financial institution or lately, insurance policies. Although a deduction can be claimed for contributions to a rehabilitation trust and the income derived by such rehabilitation trust is exempt from tax, cash strapped mining companies in the current economic environment are finding it tough to contribute the required amount of cash to the rehabilitation trusts.
Foreign property investments: controlled foreign company issues
Authors: Gary Vogelman and Alexa Muller – ENSafrica In terms of the ordinary business practices of property companies, it is not uncommon for such companies to outsource property and asset management functions to third party property and asset managers. In this regard, to the extent that a South African property investment or development company or group (“SA PropCo”) may hold property investments or developments in offshore jurisdictions, SA PropCo would usually establish a subsidiary in the offshore jurisdiction concerned or some other holding jurisdiction to hold such investment (“Foreign SubCo”).
Objective of the BEPS Action Plan
Author: Lisa Brunton The Organisation for Economic Co-operation and Development (OECD) Base Erosion and Profit Sharing (BEPS) Action Plan, approved by the OECD Committee of Fiscal Affairs (CFA) in June 2013 and endorsed by the G20 heads of government in September 2013, was formulated to combat international tax avoidance by multinational enterprises (MNEs) through artificially shifting profits to low tax jurisdictions and eroding the tax bases of their primary high tax jurisdictions of operation. The objective of the BEPS Action Plan is to secure government revenues by ensuring that profits are taxed in the jurisdiction where the economic activities generating such profits are performed and where value is created.