Draft taxation laws amendment bill submission to the standing committee on finance
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Draft Taxation Laws Amendment Bill: Submission to the Standing Committee on Finance. Dawie Maree Senior Economist 26 August 2014. About Agri SA.

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Draft Taxation Laws Amendment Bill: Submission to the Standing Committee on Finance

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Draft taxation laws amendment bill submission to the standing committee on finance

Draft Taxation Laws Amendment Bill:Submission to the Standing Committee on Finance

Dawie Maree

Senior Economist

26 August 2014


About agri sa

About Agri SA

  • Agri South Africa is a federal organisation which promotes, on behalf of its members, the sustainability, profitability and stability of agricultural through its involvement and input on national and international level

  • Represent farmers through:

    • 9 provincial unions

    • 24 commodity organisations

  • Involvement and input on national and international level

  • Representing also TAU SA, Potatoes SA


Contribution to sa s gdp

Contribution to SA’s GDP(%)

Source: SA Reserve Bank, Mar 2014


Agriculture s linkages with the rest of the economy

Agriculture’s linkages with the rest of the economy

  • Backward linkages

    • Purchases of goods such as fertilizers, chemicals and implements

  • Forward linkages

    • Supply of raw materials to industry and the food supply chain in general

  • Approximately 70 percent of agricultural output is used as intermediary products in other sectors


Agriculture s linkages with the rest of the economy1

Agriculture’s linkages with the rest of the economy

  • GDP multiplier for agriculture is 1.51. (Mullins, 2004)

    • Increase of one rand in agric production will result in an R 1.51 increase in the GDP of the country.

    • On par with the GDP multiplier for the total average economy of 1.58.

  • Labour multiplier of 24.17 outweighs all other sectors (Mullins, 2004)

    • Well above the same multiplier for the economy as a whole of 8.16.


Sars treasury proposal impact

SARS/Treasury proposal - Impact

  • SARS/National Treasury proposed to repeal the zero rating of agricultural inputs

  • Section 11(1)(g), Schedule 1 Paragraph 7(a) and Part A of Schedule 2 of the VAT Act (1991)

  • Consultations

  • Reasons

    • Fraud resulting in misuse of the VAT103 certificates


Realities of the sector

Realities of the sector

  • Seasonality of production

    • Cash flow considerations

  • Financing of VAT for a period of time

  • Compliance and associated costs


Expenditure on intermediate goods and services 2013

Expenditure on intermediate goods and services (2013)


Draft taxation laws amendment bill submission to the standing committee on finance

Expenditure on intermediary goods and services, interest, labour and investment in vehicles, machinery and implements

Source: DAFF


International situation of agriculture

International situation of agriculture

  • Peculiar nature of agriculture recognised in various other countries

  • Support for agriculture in various forms

    • EU CAP

  • Producer Support Estimates (PSE’s)


Draft taxation laws amendment bill submission to the standing committee on finance

The Producer Support Estimate (PSE)is an indicator of the annual monetary value of gross transfers from consumers and taxpayers to support agricultural producers, measured at farm gate level, arising from policy measures, regardless of their nature, objectives or impacts on farm production or income.


Producer support estimates as of gross farm receipts 2010 12 average

Producer Support Estimates as % of gross farm receipts, 2010-12 average

OECD Members

Emerging Economies

Producer Support Estimates, 2013


Role of agriculture in south africa

Role of agriculture in South Africa

  • National Development Plan

    • Job creation

    • Rural economic development

  • State of the Nation Address

  • Risks

    • Natural/climate

    • International and local economic situation

    • Policy uncertainty


  • Food security affordability

    Food security / affordability

    • Unintended consequences

    • Needs more scrutiny

    • Availability of finance to farmers

    • Production decisions

    • Supply results


    Problem statement

    Problem statement

    • Not convinced that zero ratio is root cause of the problem

    • Cost-benefit analysis of the proposal to repeal the zero rating of agricultural inputs


    Recommendations alternatives

    Recommendations / Alternatives

    • Propose some alternatives

      • Verification and audit of VAT103 certificates in conjunction with organised agriculture;

      • Additional field on VAT201 forms for zero rated inputs;

      • In the case of fraudulent activities, SARS can make full use of the law and organised agriculture will support it

      • Representative vendors to undertake VAT-duties


    Conclusion

    Conclusion

    • Neutrality of tax system

      • Can’t compare a biologically driven sector with other sectors of the economy

    • System of zero rating is of real importance to the sector


    Thank you

    Thank you

    Dawie Maree

    [email protected]

    012 643 3400

    076 376 9254


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