The golden goose’s burden

rp_3263247980.jpgOver the past few years, we have regularly raised concerns about the future of South Africa’s golden goose, the taxpayer. However, as this year’s tax season kicks off, our fears remain unabated, especially when we consider facts such as these recently highlighted by Economist Mike Schüssler:
• According to the World Bank, South Africa has the seventh highest tax revenue to GDP ratio when social security taxes such as unemployment insurance and compulsory pensions are left out.
• 27% of our GDP is paid to government, compared to the world average of 14% of GDP.
• The latest General Household Survey shows that 45% of households have at least one person receiving a government grant.
Is there a solution?
The recent formation of the Davis committee, tasked to review the tax system, has ignited the hope of new proposals that will not only expand the tax base but also stimulate economic growth. However, economic pressure and potentially reduced tax collections due to the protracted platinum mining strike and threatening strike in the metal and engineering sector could well serve up a “solution” in the form of a hike in the golden goose’s tax liability yet again.

And considering the newly created subcommittees of the Davis committee, dealing with mining, VAT and estate duty, will the coffers be filled through an increase in the VAT rate? But how much more can the golden goose be squeezed? Or will a further disincentive be introduced for the mining sector in the form of higher taxes?

Despite these matters hanging in the balance, tax planning and efficiency remains at the top of our agenda. This month, Tax Partner at Grant Thornton Johannesburg, Louis van Manen looks at the effect of Understatement Penalties on taxpayers 20 months after its introduction and highlights the key pitfalls taxpayers face.

Could we have reached the end of highlighting personal calls on our cell phone bills each month? Bruce Russell, Tax Consultant Grant Thornton Cape, considers how SARS’ Interpretation Note No. 77 will reduce the compliance burden for employer-provided telecommunication equipment and services.
And finally, in our VAT feature by Carin Grobbelaar, Senior Tax Consultant from Grant Thornton Cape, they provide an alert to all business using Loyalty Programmes as incentive schemes to encourage spending and build loyalty. SARS has issued a Discussion Paper that will potentially affect all the role players in these transactions, from suppliers to loyalty scheme members who redeem their points for purchases and it will be important to monitor developments in this area closely.