presentation footer1 presentation to the scof 2014 03 04 presenter: piet nel: project director tax
TRANSCRIPT
Presentation Footer 1
PRESENTATION TO THE SCoF
2014 03 04
Presenter:
Piet Nel:
Project Director Tax
• 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
Opening remarks
Economic outlook
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.
Budget Review2014
SAICA comments
Pages 1 - 2 of our comments
Growth is the biggest risk to the budget.
The projected increase for 2014 is optimistic.
The “tax recycling problem”
Labour market… acknowledged that unemployment is the most pressing challenge facing the country.
Budget Review2014
SAICA comments
Page 2 of our comments
The view is that this budget should have started the implementation of these structural reforms.
… unemployment in South Africa is expected to remain high … … quicker implementation of … structural reforms could result in higher growth and job creation…
IMFconsultation
The employment tax incentive
“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, ….”
SAICA comments
Pages 2 - 3 of our comments
The incentive should be expanded to the special economic zones and specific sectors
The refund mechanism should be introduced as soon as possible
IMFconsultation
The refund system will become effective during the fourth quarter of 2014.
Budget Review2014
Government debt SAICA comments
Page 3 of our 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?
Contingency reserve Page 4 of our comments
… 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.
Budget Review2014
SAICA comments
that “...wasteful expenditure” be reduced and that “... cost controls across government...” be implemented.
Pages 4 – 5 of our comments
… tax-free savings accounts will be implemented, creating a mechanism to increase household savings and support financial inclusion.
Budget Review2014
SAICA comments
The current limit in the exemption from normal tax in respect of interest earned by individuals will not be increased
Savings
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
Small business Pages 5 – 6 of our comments
… government aims to create an environment that supports both informal traders and entrepreneurs who seek to develop small businesses into larger enterprises.
Budget Review2014
SAICA comments
… reduce compliance costs and facilitate access to equity finance
Subject to public consultation
… replacing the reduced tax rate regime with an annual refundable tax compliance rebate
Wage incentive refunds
Zero-rating – farming
Page 6 of our comments
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.
Budget Review2014
SAICA comments
We therefore welcome the announcement.
It is hoped that the guidance with respect to the adjustments will be issued by SARS shortly.
International
