This article first appeared in Business Day, 10 February
Economic slowdown, strikes will take toll on revenue
The reduced tax revenue target of R895bn for the fiscal
year ending March 30 will not be achieved given the expected drop
in tax revenue, tax commentators say.
Finance Minister Pravin Gordhan, who adjusted the tax revenue
target downward by R3bn in the medium-term budget policy statement
in October, will deliver his fifth budget speech on February 26, at
a time when South Africans are battling with an interest rate hike,
price increases on all levels and a weakening rand.
The slowdown in the economy and consumer spending towards the
second and third quarters of last year, combined with the wave of
mostly illegal strikes in the mining sector which cost the country
R11bn in lost revenue will negatively affect total projected
revenue collection for the fiscal year ending March 30.
Mr Gordhan is expected to keep spending on a tight leash in
efforts to bring down the budget deficit — the difference
between revenue and spending. Rating agencies could further
downgrade SA's sovereign credit rating if the government failed
to manage its deficit.
Commentators at PwC, BDO, KPMG and the South African Institute
of Tax Practitioners (SAIT) said the continuing work of the Davis
Tax Committee, the general election on May 7 and economic pressures
on individuals and companies call for a conservative budget.
PwC predicted increases in the general fuel levy of 20c// -25c//
and in the Road Accident Fund levy of 8c//-10c//. Smokers and
drinkers could expect above inflation increases in excise duties on
tobacco and alcohol. But ah increase in direct taxes (personal
income and corporate income tax) was unlikely in an election year,
SAIT head of tax policy Sharon Smulders said last week.
SAIT CEO Stiaan Klue said the estimated tax revenue for the next
fiscal year (2014-15) was set at R985bn, a "modest" R7bn
less than the 2013 estimate.
"Considering that SA is on the eve of a national election,
the R7bn is a significant shortfall for a government faced with
enormous socioeconomic challenges, labour strikes, and ongoing
township service delivery protests," he said.
BDO tax director David Warneke predicted a rise in the marginal
tax rate of higher income earners from 40% to 45% given pressure on
the government to deliver on jobs and basic services. This view was
not shared by SAIT, KPMG or PwC.
KPMG tax director Deborah Tickle said about 388,000 people
earning more than R580,000 paid 49.2% of all the personal income
tax in 2012. "Even if one were to collect R10.000 more from
each of these taxpayers, it would only provide Mr Gordhan with
R3.88bn," she said.
Mr Warneke said more meaningful tax incentives for savings would
be welcomed in Mr Gordhan's budget speech. "As part of
this incentive, we (BDO) would like to see a significant reduction
in the taxation of retirement lump sum benefits," he said.
PwC head of national tax technical Kyle Mandy made reference to
the work of the Davis Tax Committee, which was appointed by Mr
Gordhan last year to review SA's tax policy framework, and its
role in supporting growth, employment, development and fiscal
He said no announcements were expected on mining taxes, estate
duty and donations tax, or the. value-added (VAT) rate, as these
were all areas that the committee would be reviewing.
Prof Smulders said the government would be popular with its
alliance partners if it increased capital gains tax and introduced
a luxury VAT rate.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
The expansion of the West African regional market to foreign investors, and the search for emerging markets has led to a continuous increase in business mobility and cross border investments with Nigeria.
Effective collaboration amongst government agencies, automation of processes and capacity building by tax authorities have always been identified by stakeholders as strategies for achieving an efficient tax system.
The major objective of the waiver is to promote voluntary compliance and consequently generate revenue for government which otherwise, could have been lost.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).