Author: Daniel Silke. Cape Town – To say that this is South Africa’s most important budget since 1994 is an understatement. The reality of a declining economy deeply entrenched in a seemingly endemic inability to break out of downfall mode has left both domestic and foreign investors despondent, demoralised and downright depressed. Frankly, to expect the proverbial rabbit to be pulled out of the hat to prevent the dreaded ratings agency downgrade seems unlikely. It may just be too late. And for once, economists and their related species, political analysts, should take some credit for the many warnings issued over as many years. If you fail to address policy paralysis – and also fail to encourage a diversification of your economy to the demands of the future – you will simply be left behind.
Tax News
Ratings-friendly budget key for rand
Author: Fadia Salie (News24). Cape Town – The rand, which tried to breach back below R15/$ for first time this year during the European session on Tuesday, was trading in a narrow band around R15.22/$ on Wednesday ahead of South Africa’s crucial budget speech. “Technical resistance proved too strong as cautious traders eye today’s Budget Speech,” said NKC Research in its daily economic report. “The local unit hit fresh 2-month highs as it continues to battle its way back from abyss, but the beach of Normandy lies ahead today and it could go either way.
Worry for SA’s neighbours as Gordhan readies budget
Author: Memory Mataranyika (News24). Harare – Analysts have projected a dim outlook for South Africa and its neighbours Botswana, Zambia and Zimbabwe as Finance Minister Pravin Gordhan readies for a belt-tightening Budget Speech for Africa’s second-largest economy. President Jacob Zuma last week emphasised the need to contain costs for the South African government and Gordhan will be hard pressed to deliver as he seeks to restore investor confidence and fix a struggling economy. Analysts at FocusEconomics said on Tuesday that “latest indicators point to another dismal expansion in the final quarter of 2015 and the outset of the new year. Manufacturing barely grew in December and the business confidence index recorded the second-lowest reading” in nearly a decade in January.
Budget 2016 – Will Pravin Gordhan pull it off?
Author: Solly Moeng (News24). Cape Town – South Africans at home and in the diaspora, current and potential investors, the country’s trading partners and rating agencies all have their eyes glued on one man during this week: Finance Minister Pravin Gordhan. In fact, they have one eye firmly on him and another darting uncomfortably between him and his boss, the increasingly unpredictable President Jacob Zuma, watching out for unexpected surprise moves from him.
Taxing Retirement Funding in a Nutshell – why it is not going ahead
The tax treatment of retirement funding will change with effect 1 March 2016. These changes were already promulgated into law. The changes intended to (i) harmonise the tax treatment of the various retirement funding vehicles used in South Africa, and (ii) increase savings towards the protection of retirement funding for post-retirement through forced annuitisation in respect of provident fund contributors. Provident fund members were, in terms of the new legislation, required to in future apply two-thirds of the fund benefit to acquire an annuity on retirement. Retirement funds with values less than R247 500 (up from R75 000) were not required to be annuitised.
No tax relief in sight for home buyers
Author: Alistair Anderson (BDlive) Given the state of the economy and the pressure on the fiscus in terms of tax revenue, there is unlikely to be any transfer duty tax relief in Wednesday’s budget for home buyers, especially at the upper end of the market. “Last year saw a meaningful shift of the transfer duty tax burden from the lower to the upper and luxury end of the market, with buyers paying 11% per R1m where the purchase price for the property is above R2.25m. Surprisingly we saw very little impact, if any, on the market at the upper end as a result of the increase in transfer duties,” said Jawitz Properties CEO Herschel Jawitz on Friday.
Gordhan must juggle growth, fiscal metrics and confidence
Author: Hilary Joffe (BDlive). When the new democratic SA was granted its first sovereign credit ratings, Moody’s was the only one of the big three rating agencies to rank us as investment grade. So when the 1996 national budget was tabled, SA was still rated speculative, or junk, by Standard & Poor’s and Fitch. A decade later, then finance minister Trevor Manuel went into his 2006 budget just months after SA finally made it to the top of the triple-B investment-grade scale on all three of the rating agency ladders and was just one notch below the coveted A grade..
Gordhan to target offshore funds
Author: Linda Ensor (BDlive) Finance Minister Pravin Gordhan is widely expected to announce a new foreign exchange control and tax amnesty in his budget on Wednesday in a bid to encourage taxpayers who have not disclosed billions of rand worth of offshore assets to declare them and pay the due tax. The move would help to reduce the government’s revenue shortfall, as well as broaden the tax base for future years. A new amnesty, along the lines of the previous one in 2003, is one of a raft of measures Mr Gordhan is expected to announce as the government tries to stave off a downgrade of SA’s sovereign credit rating to junk status.
SARS eases the compliance burden on certain generous taxpayers
On 2 September 2014, the South African Revenue Service (SARS) first issued Binding General Ruling 24 (Ruling). The Ruling dealt with some of the requirements that need to be met under s18A of the Income Tax Act, No 58 of 1962 (Act), in order to qualify for a deduction in terms of s37C(3) of the Act. However, due to the uncertainty that persisted regarding the application of these provisions, SARS reissued the Ruling on 15 February 2016.
SARS’s investigative powers – a possible backstage pass to matters pending before court?
Author: Yashika Govind (Associate at CLiffe Dekker Hofmeyr). Chapter 5 of the Tax Administration Act, No 28 of 2011 (TAA) confers a broad range of information-gathering powers on the South African Revenue Service (SARS). Taxpayers are often assessed for more than one tax period at a time, however, the waters become muddied when there are parallel processes carried on in which the issues being investigated by SARS, overlap with disputes pending before the Tax Court. The taxpayer is then saddled with defending itself in respect of a tax period before court while simultaneously sourcing and providing relevant material pertaining to the same legal issues for an audit of a later tax period. In these circumstances, there is often an overlap of facts, law and witnesses which will ultimately be presented in court, thus rendering the information gathering process questionable.