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PRESENTATION TO THE SCoF

PRESENTATION TO THE SCoF. Piet Nel: Project Director Tax. Presenter:. 2014 03 04. Opening remarks. SAICA’s National Tax Committee wishes to thank you for the opportunity to submit written comments and make oral presentations

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PRESENTATION TO THE SCoF

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  1. PRESENTATION TO THE SCoF Piet Nel: Project Director Tax Presenter: 2014 03 04 Presentation Footer

  2. Opening remarks • SAICA’s National Tax Committee wishes to thank you for the opportunity to submit written comments and make oral presentations • Our comments will deal with the Fiscal Framework and some of the tax related proposals made by the Minister in the 2014 / 15 Budget

  3. Economic outlook Pages 1 - 2 of our comments Budget Review 2014 GDP growth, which declined from 2.5% in 2012 to 1.8% in 2013, is projected to increase to 2.7% in 2014, reaching 3.5% in 2016. SAICA comments Growth is the biggest risk to the budget. The projected increase for 2014 is optimistic. The “tax recycling problem”

  4. Labour market Page 2 of our comments Budget Review 2014 … acknowledged that unemployment is the most pressing challenge facing the country. IMF consultation … unemployment in South Africa is expected to remain high … … quicker implementation of … structural reforms could result in higher growth and job creation… SAICA comments The view is that this budget should have started the implementation of these structural reforms.

  5. The employment tax incentive Pages 2 - 3 of our comments IMF consultation “the unemployment rate is 25% (34% including discouraged workers), youth unemployment rate at 50% ...” “all net job creation post 2009 has taken place in the public sector, ….” Budget Review 2014 The refund system will become effective during the fourth quarter of 2014. SAICA comments The incentive should be expanded to the special economic zones and specific sectors The refund mechanism should be introduced as soon as possible

  6. Government debt Page 3 of our comments SAICA comments The main concern is that South Africa’s debt is expected to increase from the 39,7% (for the 2013 / 14 year) to 41,9% in the 2014 / 15 year. The projected state debt in 2016 / 17 will, as a percentage of GDP, be at 44,3%. The fastest-growing item of main budget expenditure is debt-service costs. Is the present economic path is sustainable?

  7. Contingency reserve Page 4 of our comments Budget Review 2014 … there has … been a drawdown on the contingency reserve. As a result, the contingency reserve for 2014/15 and 2015/16 has been reduced to R3 billion and R6 billion respectively, before rising to R18 billion in 2016/17. SAICA comments that “...wasteful expenditure” be reduced and that “... cost controls across government...” be implemented.

  8. Savings Pages 4 – 5 of our comments Budget Review 2014 … tax-free savings accounts will be implemented, creating a mechanism to increase household savings and support financial inclusion. SAICA comments The current limit in the exemption from normal tax in respect of interest earned by individuals will not be increased The tax-free savings accounts should be implemented with effect 1 March 2014. The introduction (in 2014) of a new top-up retail bond product is welcomed - stokvels allowed

  9. Small business Pages 5 – 6 of our comments Budget Review 2014 … government aims to create an environment that supports both informal traders and entrepreneurs who seek to develop small businesses into larger enterprises. … replacing the reduced tax rate regime with an annual refundable tax compliance rebate SAICA comments … reduce compliance costs and facilitate access to equity finance Subject to public consultation Wage incentive refunds Zero-rating – farming

  10. International Page 6 of our comments Budget Review 2014 It is recommended that the transfer pricing provision be amended to state that the secondary adjustment is deemed to be a dividend or capital contribution depending on the facts and circumstances. SAICA comments We therefore welcome the announcement. It is hoped that the guidance with respect to the adjustments will be issued by SARS shortly.

  11. Questions Thank you for your time • Piet Nel • pietn@saica.co.za

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