Author: Banele Ginindza (Business Report) Finance Minister Nhlanhla Nene last week received preliminary recommendations from the Davies Tax Committee, but whatever the recommendations, the government faces a tough balancing act. Nene said last week at the presentation of the SA Revenue Services (Sars) collection report that he “will want to allow South Africans to engage quite openly on the issue of other sources of government revenue”.
Category: Davis Tax Committee
Finance Minister Nhlanhla Nene to seek a broader tax base
By Wiseman Khuzwayo and Bloomberg Economists were bemused by an assertion by Finance Minister Nhlanhla Nene that South Africa needed to broaden its tax base in order to curb the budget deficit, as reported by Bloomberg yesterday. They said the tax base had shrunk due to weak economic growth. Nene is to deliver his first medium-term budget policy statement as finance minister next Wednesday. In it, he is expected to revise the fiscal deficit, inflation, gross domestic product (GDP) and net debt projections. The fiscal deficit projection given for 2014/15 is now expected to be closer to 5 percent of GDP.
New relief for small enterprises
In a review released by the Davis Tax Committee during July 2014, it was concluded that the lower tax rates applicable to small business corporations (SBCs) were not as effective as intended and resulted in tax relief only applicable to about 50 000 small entities, not all of which were in the professions intended to benefit. In order to promote the intention of SBC growth and provide relief for their tax compliance costs, it is proposed that all entities (including those with an annual turnover between ZAR1 million and ZAR20 million) would be subject to the normal corporate rate of 28%, but a refundable annual rebate of ZAR15,000 would be granted to SBCs.
The Davies Tax Committe says Tax not really the problem
Author: BDlive The Davis tax committee’s discussion document on the taxation of small and medium enterprises (SMEs) could open up a useful debate on SA’s small business sector and how to boost it. This is because what the committee says, in a subtle sort of way, is that tax is not really the problem. True, the burden of compliance is a major concern for small businesses, which according to one study cited by the committee spend 255 hours a year on average to deal with all tax-compliance matters.
Taxation working well but can be more efficient, says Judge Dennis Davis
Author: Amanda Visser (BDlive) South Africa was performing far better than any of the other developing countries that formed part of a recent World Bank study, it said. However, the country would experience “extraordinary instability” without social spending by the government and unless the system was made more efficient, said committee chairman Judge Dennis Davis. He said the committee was not looking for more money, but wanted to ensure the system worked at optimal levels.
Squeeze on personal taxpayer has reached its limits, SA warned
Author: Amanda Visser (BDlive) South Africa relies too heavily on personal income tax and on value added tax (VAT) in its overall tax mix. The tax system is “at full stretch”, and any further demands will distort economic activity and the behaviour of taxpayers. These warnings were sounded by Chris Evans, professor at the school of taxation and business law at the Australian School of Business. He said the scope for extracting tax in South Africa has been “fully utilised”.
Fight graft by taking leaf from tax books of Ancient Greeks
The tax debate, internationally and in South Africa, is progressively focusing on closing perceived tax loopholes (in order to boost collections) and increasing self-assessment through vigorous auditing by the tax authorities. In pursuing this goal, Finance Minister Pravin Gordhan has appointed Judge Dennis Davis as the chairman of the Davis Tax Committee. Davis has been quoted as saying that the challenge for the committee is to design a tax system that, among other things, achieves “the spending needs of the government and its distributional ambitions”. The collection of taxes is important but addresses only one part of the equation.