Tax practitioners plays an integral part in dealing with disputes between SARS and taxpayers. The tax system has become increasingly complex and, at the same time, so has the dispute resolution process.
Considering the win-lose ratio of SARS in the Courts, SARS appears to win more and there is good business case for an even more litigious approach by SARS to ensure compliance with the various tax laws. This obviously means SARS could utilise the legal process to optimise the tax collection process even more than they currently are, achieving the balance between optimal tax collection whilst being respectful to taxpayer’s rights.
From a tax practice management perspective, the modern practitioner must bring its A-game to any dispute resolution process. This is key to resolving tax disputes before reaching litigation, critical to professionally advising clients on when to concede or further engage SARS, or just to manage the risks of clients later claiming that tax practitioner mistakes have caused them financial losses. The tax laws and procedures are heavily weighed in favour of SARS, including where SARS missed deadlines being of no consequence but taxpayer missed deadlines can result in outright loss, regardless of the merits of a matter. Therefore, optimal dispute resolution requires not only good technical knowledge and systems but, perhaps most importantly, excellent tactics. We have requested a dispute resolution expert to hold a practical session, sharing some of the best practices from the perspective of practitioners dealing with SARS on a daily basis.
What is subject to objection and appeal and what not, including how and where PAJA fits into tax related disputes;
Assessments and prescription;
Asking for reasons for an assessment:
- The importance of reasons;
- Procedure to follow when requesting reasons;
- Dealing with the quality of reasons received; and
- Reasons under PAJA vs reasons under TAA;
Requesting suspension of payment under section 164 of PAJA:
- Importance of requesting suspension of payment; and
- Procedure to follow when requesting suspension of payment;
- Submission channels and deadlines; and
- Power of attorney;
- Importance of the grounds for objection;
- Drafting the grounds (including practical examples); and
- Onus of proof;
Feedback on Objection:
- How to deal with the “Invalid objection
- Requests from SARS for further information
- Objection allowed and prescription under 99(1)(e) of the TAA
- Drafting the Grounds for appeal;
- ADR: Procedure and rules;
- Tax Board: Procedure and rules (condensed)
- Tax Court: Procedure and rules (condensed)
MTP(SA), BCom Law (cum laude), BCom Honours Taxation, MCom Taxation (SA and International Tax)
Staying abreast of tax technical developments is exceptionally time consuming and time is the one commodity most professionals lack. Yet, staying up to date is absolutely crucial in the dynamic world that is tax: your professional competitiveness depends on it. From January 2016, Nico Theron will be covering recent tax technical developments in a monthly webinar dedicated to keeping you up to speed on developments as they happen.
The monthly webinar will include discussion and analysis of:
- Case law;
- New published rulings (viz. Binding Private Rulings, Binding Class Rulings and Binding General Rulings);
- Interpretation notes;
- SARS guides;
- SARS notices;
The webinars will principally be dedicated to developments in the fields of VAT, corporate and personal income tax and Tax Administration.
MTP(SA), BCom Law (cum laude), BCom Honours Taxation, MCom Taxation (SA and International Tax)
Nico, previously from PKF/Grant Thornton, holds the degrees, BCom Law (cum laude), BCom Honours Taxation and MCom Taxation (SA and International Tax) and is also a registered Master Tax Practitioner with SAIT. Nico specialises in corporate income tax, value added tax and employees’ taxes, more specifically in the context of tax dispute resolution and ruling applications.
Tax Indaba 2015 ran September 7-11 at the Sandton Convention Centre, and it was an enormous success. Over 800 participants – including over a hundred speakers – discussed, debated and deliberated on every area of tax from every conceivable angle. We are delighted to have received overwhelmingly positive feedback. If you participated – thank you for helping make the event such a success!
Planning for the 2016 event us underway and scheduled for 5-9 September.
For more information, please visit www.taxindaba.co.za
Finance Minister Pravin Gordhan’s full 2016 budget speech as delivered in parliament on Wednesday.
Honourable Speaker Mister President
Mr Deputy President
Cabinet Colleagues and Deputy Ministers Governor of the Reserve Bank
MECs of Finance Fellow South Africans
I have the honour to present the 2016 Budget of President Zuma’s second administration.
We do so in a spirit of frankness, both about our challenges and the opportunity to turn our economy’s direction towards hope, confidence and a better future for all.
Low growth, high unemployment, extreme inequality and hurtful fractures in our society – these are unacceptable to all of us.
I have a simple message. We are strong enough, resilient enough and creative enough to manage and overcome our economic challenges.
All of us want jobs, thriving businesses, engaged professionals, narrowing inequality, fewer in poverty.
All of us want a new values paradigm, a society at peace with itself, a nation energised by the task of building stronger foundations for our future society and economy.
We want our government to function effectively, our people to work in dignity, with resources for their families, decent homes and opportunities for their children.
We want to see progress throughout our land, in agriculture, manufacturing, mining, construction, tourism, science and research, sport and leisure, trade and commerce.
It is within our grasp to achieve this future.
It requires bold and constructive leadership in all sectors, a shared vision, a common purpose, and the will to find common ground. Above all we need action, not just words.
Let us unite as a team, sharing our skills and resources, building social solidarity, defending the institutions of our democracy and developing our economy inclusively.
We do have a plan, to:
- Manage our finances in a prudent and sustainable way,
- Re-ignite confidence and mobilise the resources of all social partners,
- Collectively invest more in infrastructure to increase potential growth,
- Give hope to our youth through training and economic opportunities,
- Protect South Africans from the effects of the drought,
- Continuously improve our education and health systems,
- Accelerate transformation towards an inclusive economy and participation by all,
- Strengthen social solidarity and extend our social safety net.
The Budget rests on the idea of an inclusive social contract, encompassing an equitable burden of tax and a progressive programme of expenditures.
The Budget relies on institutions of good governance and a public ethic that values honesty and fairness.
If we act together, on these principles, as public representatives, civil servants, business people, youth, workers and citizens, we can overcome the challenges of tough economic times and difficult adjustments.
In acting together we can address declining confidence and the retreat of capital, and we can combat emerging patterns of predatory behaviour and corruption.
We are conscious of the difficulties we face. Our resilience as a nation, black and white, can propel us to a better future if we make the right choices.
Honourable Speaker, I hereby table before the House:
- The 2016 Budget Speech,
- The 2016 Budget Review, including
- The fiscal framework,
- The revenue proposals, customs and excise duties and estimates of national revenue, and
- Our responses to the Budgetary Review and Recommendation Reports,
- The Division of Revenue Bill,
- The Appropriation Bill, and
- The Estimates of National Expenditure.
In addition, I am introducing the Revenue Laws Amendment Bill 2016 to adjust certain provisions regarding to retirement funds, and related matters.
These are our budget proposals, and I look forward to further engagement through the Parliamentary budget process.
Overview of the Budget
Honourable Speaker, the past year has seen a deterioration in the global economy.
In our own region, weaker business confidence coincides with a severe drought, bringing with it rising prices and threats to water supply in many areas.
In addition we are obliged to confront the impact of slow growth on our public finances, while continuing to respond to the expectations of citizens and communities for improved education, reliable local services and responsive public administration.
The combination of multiple demands and constrained resources at times seems overwhelming. How does the state deal with such complexity? What should we prioritise?
As in the past, we have sought advice from citizens. This year, I sought budget pointers on several specific things: What does government do well? What should we stop doing? How can we achieve inclusive growth?
- On what we do well, South Africans have very clear views: Tax administration. And paying social grants.
- What we should stop doing: Corruption and waste. Bailing out state entities.
- How to support inclusive growth: Support for small business. Job opportunities targeting the youth.
I greatly appreciate the response from so many South Africans – over 1500 in all. Mr Faiek Sonday, and Ms Thuli Ngubane are with us today. Mr Sonday’s advice was that “we should build more roads and train routes, because the sooner you get a worker at the desk or machine the more productive the economy will be”. And Ms Ngubane expressed the views of so many tipsters: “Let our schools’ infrastructure be improved so that all schools are conducive to learning. This will ensure that we produce the quality of students that can take our country forward.”
We agree, and indeed these are central priorities of the National Development Plan.
As points of departure for the 2016 Budget, Honourable Speaker, allow me to emphasise several broad principles that flow through our NDP:
- It is a programme for inclusive growth – our social programmes, industrial action plan, promotion of agriculture and rural development, skills and training initiatives, investment in housing and municipal services are aimed at both prosperity and equity, creating opportunities for all and broadening economic participation.
- It is a plan for a strong mixed economy – in which public services and state actions complement private investment, expansion of trade and social enterprise.
- It recognises that improvements in the quality of education are the foundations of broad-based growth, productivity improvement and sustainable growth.
- It acknowledges that investment in infrastructure has to be enhanced and sustained both to underpin economic growth and address the spatial inefficiency and fragmentation of the apartheid landscape.
- It emphasises that employment creation has to be accelerated if growth is to be inclusive, and that income security for all relies also on appropriate social security, health services and social development programmes.
- It prioritises building the capability of the state, and strong leadership throughout society, to drive development and promote social cohesion.
- It highlights that partnership between government, business, organised labour and civil society is the key to policy coherence and more rapid development.
The Budget tabled today is guided by the NDP. It is a budget for inclusive growth, it emphasises partnerships amongst role players in our economy, it prioritises education and infrastructure investment, it supports employment creation and it contributes to building a capable, developmental state.
In brief, we propose the following:
- Against the background of slow growth, rising debt and higher interest rates, the pace of fiscal consolidation will be accelerated. The budget deficit will be reduced to 2.4% by 2018/19.
- The expenditure ceiling is cut over the next three years by R25bn, mainly by curtailing personnel spending.
- Tax increases amounting to R18bn in 2016/17 are proposed, and a further R15bn a year in 2017/18 and 2018/19.
- An additional R16bn is allocated to higher education over the next three years, funded through reprioritisation of expenditure plans.
- Taking into account projected increases in the cost of living, R11.5bn is added to social grant allocations over the next three years.
- Funds have been reprioritised to respond to the impact of the drought on the farming sector and water-stressed communities.
In support of growth and development, Honourable Speaker, our initiatives are also aimed at enabling and mobilising private sector and civil society capacity.
- Building on the success of our Renewable Energy initiatives, the Independent Power Producers Programme will be extended to include coal and gas power projects over the period ahead.
- Measures to strengthen tourism, agriculture and agro-processing are in progress.
- Collaboration with regional partner countries is being stepped up to improve border management, streamline trade flows and invest in transport and communications corridors.
- Investment in our cities is being accelerated, creating opportunities for participation of developers and other partners in housing, infrastructure and commercial development.
- Regulatory challenges that affect mining investment and employment are being addressed.
- A pathbreaking study of the cost of doing business has been completed, and municipalities are working on identified reforms.
- Progress has been made towards a minimum wage framework, and to reduce workplace conflict.
- The National Health Insurance White Paper has been published, and proposals for comprehensive social security will be released by mid-year.
Engagement with social partners needs to be intensified. Project plans and investments need to be managed and implemented.
But I know you will join me in acknowledging that the real champions of our development are the activists and entrepreneurs, officials and facilitators, who get on with the job, day by day, of managing programmes and running businesses, serving communities and meeting needs.
Our faith communities, non-governmental organisations and community volunteers all demonstrate daily that basic needs can be met with dignity. Initiatives like “Operation Hydrate” and “Gift of the Givers” have led the way in responding to the impact of the drought.
The Gauteng Province’s Ntirhisano outreach programme similarly emphasises that communities can be co-partners with government in accelerating service delivery. We can strengthen these efforts as government, business, religious and community organisations, by working together.
Honourable Members, South Africa’s economic prospects are intertwined with global economic developments. A period of unprecedented monetary stimulus in response to the 2008 recession is not yet over, and global volatility and structural imbalances are far from resolved.
The pace of economic growth has slowed in many countries. The price of oil has fallen by 50 per cent since December 2014.
Our major exports – platinum, gold, iron ore and coal – have seen substantial declines in global demand and in prices. The effects on our economy are widespread:
- Lower export earnings,
- Lower revenue,
- Declining investment,
- Job losses, and in some cases business failures.
For the world as a whole, growth declined from 3.4%in 2014 to an estimated 3.1% last year. In sub-Saharan Africa, the decline was from 5% to 3½%. A moderate recovery is expected over the next two years.
It is notable that faster growth is being achieved in countries which have undertaken bold structural reforms, such as India’s scaling back of subsidies for industry and opening up of trade opportunities, and the promotion of skilled immigration, urban investment and labour-intensive manufacturing and agro-processing in South-east Asian and several African economies. These efforts have helped boost investor sentiment and reduce economic vulnerabilities.
Our own structural challenges and reforms are articulated in the National Development Plan. Our economic recovery depends on our ability to convert the plan into actions that deliver on the promise for a better life for all.
South African economic outlook
Fellow South Africans, growth rates of below 1% fall short of what we need to create employment and reduce poverty and inequality. The Treasury currently expects growth in the South African economy to be just 0.9% this year, after
1.3% in 2015. This reflects both depressed global conditions and the impact of the drought.
It also reflects policy uncertainty, the effect of protracted labour disputes on business confidence, electricity supply constraints and regulatory barriers to investment.
However, the institutional foundations of our economy remain resilient:
- Macroeconomic policy is effective,
- The inflation targeting framework provides an anchor for price and wage setting,
- Our banks and financial institutions are well-capitalised, and we have liquid rand-denominated debt markets,
- The architecture of our Constitution, justice system, public and private law and dispute resolution mechanisms is robust,
- We have excellent universities and research centres,
- We have a strong private sector,
- We are a resourceful people, committed to contributing to a better South Africa.
Mr Raymond Wesley wrote to me as follows: “As South Africans, we don’t have an appreciation of the strides we’ve made. Minister, show South Africans, especially the rich, that people’s lives have changed for the better.”
This is true, yet there is more to be done.
We are resilient, we are committed, we are resourceful. We know how to turn adversity into opportunity.
In the numbers, Honourable Speaker, there are indicators that an economic turnaround is possible if we build confidence and make the right choices.
- Business services, tourism and communication services continued to expand over the past year, contributing positively to job creation.
- While overall agricultural output has declined under severe drought conditions, there has been strong growth in several export products: including nuts and berries, grapes and both deciduous and citrus fruits.
- Overall export growth by volume was over 9% last year, and will continue to benefit from the competitiveness of the rand. South African exports to the rest of Africa now exceed R300bn a year, up from about R230bn just three years ago.
- Retail trade data for the last quarter of 2015 indicate growth of over 4% in real terms, signalling that consumer spending remains buoyant despite declining confidence.
- Investments amounting to over R20bn have recently been announced in the automotive sector.
Yet our economy is not growing fast enough to raise employment or improve average incomes, Honourable Speaker. Investment growth must be substantially scaled up.
Growth and development
So we are resolved to restore the momentum of growth, to ensure that it is inclusive and sustainable, and to preserve our economy’s investment-grade status.
As Minister Nene put it in his October Medium Term Budget Policy Statement address: “If we do not achieve growth, revenue will not increase. If revenue does not increase, expenditure cannot be expanded.”
This means we must address institutional and regulatory barriers to business investment and growth. It means we must give greater impetus to sectors and industries where we have competitive advantages. And it means being bold where there is need for structural change, innovation and doing things differently. We need agility and urgency in implementation.
International experience has demonstrated that growth is ignited by strong and stable political and economic institutions, sound infrastructure that reduces the cost of doing business and facilitates trade, competition between firms and openness to trade and an environment where firms invest and undertake research and development. We also know that the more inclusive the economy the greater its scope for growth.
These are the challenges we hear in South Africa today.
- We are responding to appeals from the business sector for greater certainty in respect of policies that affect investment decisions.
- We are engaging with proposals from organised labour for a minimum wage policy, and for progress on opportunities for young people.
- We are responding to action in communities where services are missing or badly managed.
- We are crafting solutions to the voices of students regarding fees and housing.
I need to emphasise that violent protest is not an acceptable way of articulating these challenges.
Also, in these and other areas, the choices we make cannot meet every need, and the action we require involves collective action by many stakeholders. Today’s Budget sets out government’s plans for the next three years, building on what we have achieved since 1994. It also signals the actions underway to improve policy coordination and collaboration between social partners and stakeholders.
As outlined by the President, initiatives are in progress to address our policy coordination and implementation challenges.
- Over 80 bills and plans have been reviewed since September last year as part of the new socio-economic impact assessment programme, under Minister Radebe’s oversight. The aim is to address possible regulatory constraints pro-actively before they take effect.
- Visa regulations have been revised following consultation between Ministers Gigaba and Hanekom and concerns raised by the tourism industry.
- Talks are in progress under Minister Olifant’s leadership to improve workplace dispute resolution procedures.
- Minister Davies is introducing a new investment promotion agency to streamline administrative procedures and enhance our position as an African financial centre.
- Special economic zones and employment-intensive sectors with export potential have been prioritised for support by the Industrial Development Corporation.
- Initiatives to transform ownership of land and improve productivity in agriculture are under way, and Ministers Zokwana and Nkwinti are addressing drought-related challenges in rural areas.
- Under Minister Molewa’s guidance, South Africa’s response to the global climate change challenge has been prepared, and work with the National Business Initiative on the green economy has been strengthened.
- Our environmental employment programmes continue to earn international recognition. The Community Work Programme is expanding its reach and Jobs Fund partnership projects of R12bn have been approved.
- Building on the Phakisa oceans economy initiative, a R9bn investment in rig repair and maintenance facilities at Saldanha Bay is planned, and work has begun on a new gas terminal and oil and ship repair facilities at Durban.
- Minister Joemat-Pettersson is overseeing our renewable energy, coal and gas IPP programme, and preparatory work for investment in nuclear power.
- Minister Pandor’s department is leading work on beneficiation initiatives, including titanium, fuel cells, fluorochemicals and composite materials.
- Minister Motshekga is working with social partners on the National Education Collaboration Trust to identify and implement school improvement initiatives.
In recent weeks, President Zuma, other Ministers and I have engaged with business leaders to understand their concerns and views. Confidence and shared understanding have been reinforced. These engagements are clearly critical to boosting our economy, and must be extended to include regional forums and other stakeholders.
We particularly welcome the working groups that have been established and several practical proposals for joint action. These include a collaborative initiative to combat corruption and abuse of tender procedures, a new fund to accelerate small and medium enterprise development and measures to build investor confidence and contribute to social cohesion.
By removing constraints, supporting innovation, protecting jobs, diversifying our economy and exploring new opportunities, we can expand growth prospects.
Our economic outlook is not what it should be, global uncertainty and the drought are very real challenges, but our efforts to build a better future continue.
We are resilient, we are committed, we are resourceful.
By working together we can increase growth, broaden participation and inspire confidence in our economy and society.
Investment and sustainable growth
Honourable Members, the economist Dani Rodrik has recently noted that in those countries that are still growing rapidly, despite global economic headwinds, public investment is doing much of the work. To finance the investment needed for sustainable growth, we have the institutional capacity to blend international and domestic savings, and to combine public and private sector financing to mitigate risk and reduce the cost of capital.
The Presidential Infrastructure Coordinating Commission, under Ministers Nkwinti and Patel, has brought greater coherence to our strategic investment plans. They
have drawn attention to the need for multi-year appropriations for major capital projects. Reform in this regard is under consideration.
- Energy investment amounts to R70bn this year and will be over R180bn over the next three years, as construction of the Medupi, Kusile and Ingula power plants is completed.
- Transport and logistics infrastructure accounts for nearly R292bn over the next three years under Minister Peters’ oversight. Transnet is acquiring 232 diesel locomotives for its general freight business and 100 locomotives for its coal lines. There is R3.7bn to upgrade the Moloto Road, R30bn for provincial roads maintenance, R18bn for bus rapid transit projects in cities and refurbishment of over 1 700 Metrorail and Shosholoza Meyl coaches.
- R62bn is allocated for the housing subsidy programmes of Minister Sisulu’s department, and R34bn for bulk infrastructure and residential services in metropolitan municipalities.
- R28bn will be spent over the MTEF on improving health facilities and R54bn on education infrastructure.
- Under Minister Mokonyane’s leadership, the next phase of the Olifants River water scheme is in progress, completion of the supply to Lukhanji Municipality in the Eastern Cape, completion of the Wolmaransstad wastewater treatment works and construction of the Polihali Dam as part of the Lesotho Highlands project.
These are some components of the R870 billion public sector infrastructure programme over the next three years.
But our growth and development depends also on an expanding envelope of enterprise investment in industry, mining and mineral beneficiation, agriculture and agro-processing, housing, commercial development and tourism facilities. There are also initiatives in progress to reinforce financing of these projects.
- The Industrial Development Corporation continues to play a leading role in financing manufacturing and beneficiation. It plans to invest R100bn over the next five years, including R23bn set aside to support black industrialists.
- We have completed a R7.9bn capital transfer to the Development Bank of Southern Africa, approved in 2013, which enables it to expand lending and implementation support to municipalities, and to complement private sector funding of strategic infrastructure projects. The Bank aims to increase lending by R48bn over the next three years. Initiatives to reinforce municipal implementation capacity have been prioritised.
- The Land Bank has set aside a concessionary loan facility to assist farmers in recovering from the impact of the current drought conditions. Over the next three years R15 billion is allocated for land acquisition, farm improvements and expanding agro-processing opportunities.
- I am also pleased to confirm that the New Development Bank will open its Africa Regional Centre in Johannesburg next month. Our first instalment of R2 billion was paid in December last year, and the Budget makes provision for our further commitments over the medium term. This initiative gives impetus to our role as a financial centre for Africa, and will facilitate access to global finance by African investors and institutions.
So the capacity to mobilise finance is in place. Amendments to bank regulations are proposed, furthermore, which will facilitate lending for long-term infrastructure investment.
In energy, transport, telecommunication and urban development, there are many opportunities for joint public and private investment and facilities management.
Corporate investment and participation by trade union funds in infrastructure development needs appropriate policies and market structure frameworks, clarifying the roles and linkages between public and private sector service providers. Progress in these regulatory arrangements is the key to more rapid investment and more inclusive growth in these sectors.
Our working partnership with business leaders and social stakeholders, under President Zuma’s initiative, is about implementing these and other aspects of the National Development Plan.
This year’s Budget, Honourable Speaker, is focused on fiscal consolidation. We cannot spend money we do not have. We cannot borrow beyond our ability to repay. Until we can ignite growth and generate more revenue, we have to be tough on ourselves.
A central objective is to stabilise debt as a percentage of GDP. To achieve this, the new budget framework sets deficit targets for the next three years which are lower than the October Medium Term Budget Policy Statement projections. Spending plans are reduced, a higher revenue target is set and net national debt is projected to stabilise at 46.2 per cent of GDP in 2017/18, and to decline after that.
These budget proposals signal government’s commitment to a prudent, sustainable fiscal policy trajectory, and respond directly to the changed circumstances since the 2015 MTBPS was tabled.
Honourable Members, we have had to take into account the slowdown in revenue associated with slower economic growth over the past year. In last year’s Budget we projected total tax revenue of R1 081 billion. The revised estimate is R11.6 billion short of this total, but nonetheless about 8.5 per cent more than the 2014/15 outcome. This is a most commendable effort in the circumstances: all South Africans have contributed, and the 14 000 staff of the Revenue Service have done a sterling job.
A consolidated revenue target of R1 324 billion is set for 2016/17, or 30.2 per cent of GDP. Expenditure will be R1 463 billion, leaving a budget deficit of R139 billion, or
3.2 per cent of GDP. The deficit will decline to 2.4 per cent in 2018/19.
Details of the proposed adjustments are set out in the Budget Review. I have highlighted key spending priorities already. I need to emphasise that additional spending on higher education, small business development, and amounts set aside for responding to the drought and other contingencies, are accommodated through stringent cost containment measures across all departments.
- Restrictions on filling managerial and administrative vacancies, subject to review of human resource plans and elimination of unnecessary positions;
- Reduced transfers for operating budgets of public entities;
- Capital budgeting reforms to align plans with budget allocations while strengthening maintenance procedures;
- Mandatory use of the new e-tender portal, thereby enforcing procurement transparency and accessible reference prices for a wide range of goods and services;
- A national travel and accommodation policy and instructions on conference costs;
- New guidelines to limit the value of vehicle purchases for political office- bearers;
- Renegotiation of government leasing contracts;
- New centrally negotiated contracts for banking services, ICT infrastructure and services, health technology, school building and learner support materials.
Initiatives of the Chief Procurement Officer will be extended to include monitoring of state-owned companies’ procurement plans and supply chain processes, and reviews of contracts above R10 million to ensure value for money. Centrally negotiated contracts will be mandatory with effect from April 2016.
As Ms Nobuntu Mbelle advised me: “Minister, government should also tighten its belt.”
The OCPO’s mandate is to achieve savings of R25 billion a year by the third year of the current MTEF period, out of a government procurement budget of about R500 billion a year. Our reform proposals draw on a consultation programme last year that reached over 7 000 suppliers and 2 500 supply chain practitioners, and attracted over 27 000 responses to a national survey.
It is clear that we can achieve considerable savings to government, while also ensuring that procurement processes are streamlined and service providers are paid on time.
I need to acknowledge the valued cooperation of Minister Ramatlhodi in addressing our personnel management challenges. Government procurement reforms also rely on collaboration with my colleagues and their respective departments: Minister Nxesi at Public Works, Minister Davies and Minister Zulu in respect of industrial participation, supplier development and black economic empowerment, and Minister Cwele on telecommunications and the rollout of broadband services, which is both an area of cost-saving in itself and an enabling condition for more efficient procurement systems and electronic communication.
In saying this, Members of the House, I want to draw attention to the broader opportunities that well-managed public administration reforms offer. Investments by telecommunication partners in fast internet connectivity for schools, clinics and government buildings brings down the costs, over time, for internet connectivity for neighbouring homes and businesses. When government office accommodation projects are well planned, they create opportunities for commercial and residential development in the surrounding precinct. And government as an employer contributes to training and organisational development across the wider economy. Inclusive growth is in part about these linkages between public and private sector development.
Inclusivity is also an important principle in our tax system, Honourable Speaker.
South Africa has built one of the most effective tax authorities in the developing world. The Revenue Service has made huge strides over the past decade in enforcing the law while providing assistance to small businesses and individuals. Public compliance with tax obligations is high. I am deeply mindful that we have a corresponding obligation, as government, to improve the impact of every rand spent, and to eliminate waste and corruption.
Inclusivity is also about the details of tax design, how it supports or hinders small and growing businesses, how the burden of tax is shared across individuals and households in different circumstances and in different income brackets, and how taxes contribute to environmental and health objectives.
This year, in view of the need to raise additional revenue and reduce the budget deficit, we have paid special attention to the fairness and inclusivity of the tax system.
We have also been mindful of the need to moderate the impact of tax increases on households and firms in the present economic context.
Our tax proposals include the following:
- Personal income tax relief of R5.5 billion, which partially compensates for inflation, focused mainly on lower- and middle-income earners;
- An increase in the monthly medical tax credit allowances;
- An increase of 30 cents a litre in the general fuel levy;
- Introduction of a tyre levy to finance recycling programmes, increases in the incandescent globe tax, the plastic bag levy and the motor vehicle emissions tax;
- Introduction of a tax on sugar-sweetened beverages; and
- Increases of between 6 and 8.5 per cent in the duties on alcoholic beverages and tobacco products.
The Income Tax Act already contains measures to encourage provision of bursaries by employers to employees or their relatives. It is proposed that the income eligibility limits and qualifying bursary values should be increased. Inclusion of industry-based training organisations in the list of activities qualifying for tax-exemption is also under consideration.
Our current taxes on wealth are under review by the Davis Committee. Higher capital gains inclusion rates are proposed, together with an increase in the annual amount above which capital gains become taxable. The transfer duty rate on properties above R10 million will increase from 11 per cent to 13 per cent, and measures are proposed to strengthen the estate duty and donations tax.
We will continue to act aggressively against the evasion of tax through transfer pricing abuses, misuse of tax treaties and illegal money flows. Drawing on the work of the OECD, the G20 joint project on base erosion and profit shifting and independent bodies such as the Tax Justice Network, further measures will be taken to address such revenue losses, including inappropriate use of hybrid debt instruments.
With effect from 2017, international agreements on information sharing will enable tax authorities to act more effectively against illicit flows and abusive practices by multinational corporations and wealthy individuals. Building on the expertise gained by the Large Business Centre since its establishment in 2004, SARS is well placed to take advantage of the new Common Reporting System. Our international collaboration is an essential part of efforts to ensure that the tax system remains robust and contributes to inclusive growth. I will announce further steps in this regard later in the year.
Time is now running out for taxpayers who still have undisclosed assets abroad. With next year’s deadline in mind, additional relief will be offered for a period of six months, from October this year, to allow non-compliant taxpayers to regularise their affairs. Though not introduced today, we publish on our website the draft bill on the special voluntary disclosure programme and the rates and threshold bill.
Social security, health insurance and retirement reform
Alongside the impact of tax on take-home pay, Honourable Members, there are also contributions to pension and provident funds, group life arrangements and medical schemes. Not everyone makes these contributions, and so their benefits are not universally enjoyed.
Our policy commitment is to achieve universal health coverage, and comprehensive social security. These contribute to the broader framework for inclusive growth, decent work, income security and social protection that forms part of the National Development Plan.
These are not straightforward reforms. Health financing is complex, because the demands unavoidably exceed available funds. This is the case even in advanced rich countries. Retirement and social security reform is complex, because existing arrangements create long-term obligations, and the needs of today all too easily crowd out provision for tomorrow.
Yet we must confront these challenges.
Minister Motsoaledi has published the White Paper on National Health Insurance. He has rightly emphasised that public health service delivery improvements must be prioritised, and reform of the private health and medical scheme environment is needed. In order to take the White paper’s proposals forward, the Treasury will shortly release further details on financing aspects.
In taking the comprehensive social security agenda forward, we have to recognise that existing social security arrangements are fragmented, which raises costs and leaves several social needs unaddressed.
Minister Dlamini and I have a shared responsibility for the social security reform programme, which has to draw on both international good practice and interdepartmental work of recent years.
Tighter regulation of the retirement funding industry is part of this reform effort. The intention is to protect members’ interest and ensure that funds are not dissipated by unnecessary administration and financial costs, and that an income in retirement is assured. Our engagements with stakeholders will continue this year.
To support a greater national savings effort, we introduced Tax Free Savings Accounts last year. The response has been most gratifying – about 150 000 accounts have been opened, with savings totalling R1 billion. For those who have not yet taken this opportunity, you have until the end of this month to take advantage of this year’s R30 000 limit for special tax treatment in these accounts.
Let me assure public servants, again, that reform of the retirement system will not affect their accrued pension rights. Indeed, I am pleased to report that the investment portfolio of the Government Employees’ Pension Fund grew by 12.2 per cent to R1.6 trillion in the year to March 2015. GEPF pensioners will receive a 5.3 per cent increase in April this year.
The Revenue Laws Amendment Bill 2016 introduced today gives effect to the decision by Cabinet last week to postpone the annuitisation requirement for provident fund members for two years to allow for further consultation with key stakeholders. The tax benefits will continue to be implemented from 1 March 2016 for all retirement fund contributions, including for provident funds.
State-owned companies, Honourable Speaker, have important roles to play in boosting growth and development. But there are issues to address in their governance, mandates, financing and operations.
The recently-released report of the Presidential Review Commission on State-Owned Enterprises is a very welcome guide to the path ahead. It rightly emphasises that effective leadership is central to progress. It notes that our infrastructure financing requirements are huge, and require effective co-funding arrangements between SOCs and other investors.
The asset base of state owned entities is over R1 trillion, equivalent to about 27 per cent of GDP. They maintain networks and provide services – power, roads, transport, water, communications – on which the rest of the economy depends.
But the PRC report indicates that the mandates of some of our entities overlap, some operate in markets that should be more transparently competitive and some are no longer relevant to our development agenda. Some are in perpetual financial difficulties. So we must take decisive steps to ensure that they are effectively governed and that they contribute appropriately to the attainment of the National Development Plan.
Firstly, as President Zuma has indicated, entities that are no longer necessary should be phased out. The resources raised or saved will be redirected to the balance sheets of SOCs that should grow.
Secondly, where entities have overlapping mandates, rationalisation options will be pursued. The merger of our housing DFIs is already in progress. There are entities with regulatory responsibilities where capacity should be combined. We have national and provincial entities with diverse property holdings, interests in farming or trading or manufacturing enterprises – often inherited from the pre-1994 dispensation, typically buried in subsidiary companies that are not publicly accountable. These are unnecessary state investments, and often a drain on government resources. They are also assets with potential for growth in independent hands.
It seems clear, furthermore, that we do not need to be invested in four airline businesses. Minister Brown and I have agreed to explore the possible merger of SAA and SA Express, under a strengthened board, with a view to engaging with a potential minority equity partner, and to create a bigger and more operationally efficient airline.
Thirdly, the balance sheets of several entities with extensive infrastructure investment responsibilities are now stretched to their limits. Government has provided support in the form of guarantees, which now total R467 billion or 11.5 per cent of GDP. This is a source of pressure on the sovereign rating. Yet we need to accelerate infrastructure investment in the period ahead. So we must broaden the range and scope of our co-funding partnerships with private sector investors. This requires an appropriate framework to govern concession agreements and associated debt and equity instruments, and appropriate regulation of the market structure.
In taking this forward, we are able to draw on our experience in road funding concessions, in building the renewable energy market, and in promoting broadband telecommunications. Across these and other sectors we have much to learn from each other, both nationally and through provincial and local initiatives.
Minister Brown is in discussion with Transnet’s leadership on measures to accelerate private sector participation in the ports and freight rail sector. The intention is to improve efficiencies, reduce the cost of doing business and increase investment in new port facilities and inland terminals. This will complement investments that Transnet has already initiated through its Market Demand Strategy.
Our aim is to strengthen our state entities so that they can play a propulsive and dynamic role in our development. Further financial support to state-owned companies will depend on clarity of this mandate and firm resolution of governance challenges.
Our regulatory agencies have a special responsibility in this regard: in setting prices for electricity, transport and water utilities, they have to ensure that investment can continue to be financed and that costs are properly managed.
The strength of our major state-owned companies does not lie in protecting their dominant monopoly positions, but in their capacity to partner with business investors, industry, mining companies, property and logistics developers, both domestically and across global supply chains.
The 2016 Budget: Government’s Action Plan
Before concluding, Honourable Speaker, allow me to return to the main elements of the 2016 Budget, our spending plans and their contribution to growth and broadening development.
Our approach is to build on our strengths, directly address weaknesses and be bold where new initiatives are needed.
- The budget framework brings forward our fiscal consolidation, reducing the budget deficit to 2.4 per cent by 2018/19.
- Taxes are raised moderately, across a broad base, while limiting the impact on lower-income families.
- Personnel spending has been curtailed and cost containment measures are reinforced.
- Expenditure growth is focused on post-school education and training, economic infrastructure, social protection and health services.
Budget allocations for water infrastructure this year take into account the special needs of drought-affected areas and the need to address water losses in critical supply networks.
The Regional Bulk Infrastructure Grant programme has been allocated R15 billion over the medium-term for the construction of the bulk water and sanitation infrastructure.
Public transport improvements in our cities are again prioritised, alongside better road maintenance and rehabilitation plans.
Over the MTEF period R1.6 billion is allocated to the SA Connect broadband programme to support access in remote areas and of schools, health care facilities and government institutions.
Business support and empowerment
Steps to reduce the regulatory burden for business investors are in progress. These include the establishment of Invest South Africa as a partnership with the private sector and concerted efforts by our largest cities to reduce the administrative costs of starting businesses.
A review of business incentives has been initiated, to strengthen their impact on growth, productivity, competitiveness, trade and competitiveness.
R475 million has been reprioritised to the Department of Small Business Development for assistance to small and medium enterprises and cooperatives.
Programmes aimed at revitalizing agriculture include spending on small-scale farming and developing agri-parks in rural economies.
An amount of R2.8 billion is allocated over the medium term to Fetsa Tlala, a food security initiative. The Department of Agriculture, Forestry and Fisheries aims to bring 120 000 hectares of land into productive use in the period ahead, benefitting 145 000 subsistence and smallholder producers each year.
Already this year, the department of Water and Sanitation has reprioritised R502 million to deliver water, protect springs and refurbish boreholes in response to drought conditions. Funds have also been provided for feed and support for livestock farmers, and disaster relief measures. Additional drought response allocations will be made, as required, in the Adjustments Appropriation later this year.
An additional R16.3 billion has been allocated for higher education over the next three years. R5.7 billion of this addresses the shortfall caused by keeping fees for 2016 academic year at 2015 levels, and the carry-through costs over the MTEF period. R2.5 billion goes to the National Student Financial Aid Scheme to clear outstanding student debt, along with a further R8 billion over the medium term to enable current students to complete their studies.
Basic education and early childhood education
Our expenditure on basic education will increase from R204 billion this year, to R254 billion in 2018/19. By 2018, 510 inappropriate and unsafe schools will be rebuilt, 1 120 schools will be supplied with water and 916 schools with electricity.
An additional allocation of R813 million for early childhood development is proposed to increase the number of children in ECD centres by 104 000 over the MTEF period.
Health and welfare services
R4.5 billion is budgeted over the medium term for revitalizing health facilities in the eleven NHI pilot districts, and related health system reforms. An additional R740 million has been allocated to strengthen TB programmes to encourage early detection and treatment, and R1 billion for expansion of the antiretroviral treatment programme.
Additional funds are allocated for new substance-abuse treatment centres in the Northern Cape, Free State, Western Cape and North West provinces.
Social grant increases
Our overall expenditure on social assistance will increase from R129 billion this year to R165 billion in 2018/19.
- The old age, disability and care dependency grants will rise by R80 to R1 500 in April 2016, and by a further R10 to R1 510 in October.
- The child support grant will rise by R20 to R350 in April and the foster care grant by R30 to R890.
Defence, public order and safety
Spending on defence, public order and safety services will rise from R172 billion this year to R204 billion in 2018/19.
Taking into account recommendations of the Farlam Commission of Inquiry, an amount of R598 million is allocated to enhancing capacity of Public Order Policing units over the MTEF period ahead. Allocations are also made to strengthen institutions supporting Constitutional democracy and to combat corruption, and to enhance the independence of the judiciary. Funds are allocated for the Information Regulator established in terms of the Protection of Personal Information Act of 2013.
Provincial expenditure management
Honourable Speaker, our Constitution requires an equitable division of nationally collected revenue between national, provincial and local government.
Taking into account the current fiscal framework, the Provincial MECs for Finance have agreed to a Joint Action Plan to address expenditure management and service delivery improvement challenges.
Key measures include:
- Containment of administrative personnel expenditure while protecting education and health service staff;
- Improved revenue collection;
- Rationalisation and closure of redundant and underperforming programmes and entities;
- Intensification of cost-containment measures, in keeping with national guidelines.
Municipal financial management
We are mindful that municipalities face growing pressures from both the rising cost of bulk services and rapidly growing numbers of households.
Municipal capital spending exceeded R53 billion in 2014/15.
Yet we continue to see underspending of infrastructure grants in many local authorities. A review of these grants has led to several proposals for improvement:
- Grant frameworks will in future allow for refurbishment of assets, recognising the long-term nature of municipal infrastructure.
- Water sector grants will be restructured to reduce duplication and the associated administrative burden.
- Refinements are proposed to take into account the diverse challenges of urban and rural areas, and different-sized towns and cities.
- Public transport transfers to cities will now be allocated through a formula, bringing greater certainty and sustainability to these funding arrangements.
This year brings our fourth fully democratic local government elections. In recognition of this, the National Treasury will launch a data portal to provide all stakeholders with comparable, verified information on municipal financial and non-financial performance. I hope this will further stimulate citizen involvement in local governance.
The elections will also see a significant change in municipal demarcations. The number of municipalities will be reduced from 278 to 257, with the objective of improving their viability and sustainability. Local government allocations will be revised to take account of these boundary changes and over R400 million is allocated over the next two years to assist with the transition.
The “Back to Basics” programme launched in 2014, aimed at improving service delivery performance of municipalities, is entering its second phase of implementation. It involves active monitoring of performance in governance and service delivery, support to struggling municipality and stronger accountability measures.
Investment in cities and urban networks
Cities are already taking steps to encourage higher land use density and inner city redevelopment, under the authority of the new Spatial Planning and Land Use Management Act. This will unlock significant further private sector development potential across our cities, focussed on strategic corridors.
Bus rapid transit systems are operational and expanding in Johannesburg, Tshwane, Cape Town and George, and will be extended to Ekurhuleni and eThekwini this year. About R6 billion is allocated to this programme in 2016/17. Improvements to rail rolling stock and infrastructure will begin to improve the daily travel experience for commuters.
Associated with these transport investments, over 90 integrated land development projects valued at more than R130 billion are in progress to reshape our cities in partnership with the private sector.
- In eThekwini, the Cornubia node comprises 25 000 housing units. An inner city regeneration programme is also underway, including projects at Bridge City, Centrum, the Point and the interconnecting corridor.
- In the Tembisa Corridor in Ekurhuleni, R6.5 billion in public investment will leverage R8 billion in private sector investment to deliver housing, commercial and office facilities.
- In Cape Town, the N2 Gateway housing programme is continuing, together with redevelopment of the Voortrekker Road Corridor, Conradie Hospital, the Athlone Power Station and other sites.
- In Tshwane, investments are focused on the Mabopane Station Hub which is the gateway to the north for more than 150 000 passengers a day and has an informal market accommodating approximately 2500 traders.
- In Manguang, the R2.6 billion mixed use Airport Development Node is in construction. An inner city residential development is planned and the Vista Park and Brandkop projects will yield over 8 500 housing units at a total development cost of over R1.9 billion.
- In Johannesburg, the “Corridors of Freedom” connecting Soweto, Alexandra, Sandton and the Johannesburg CDB bring together public transport improvements, social amenities and partnerships with property developers to increase settlement densities and improve social mobility.
Growth, Inclusion and Social Cohesion
Honourable Speaker, our economic imperative is to ignite inclusive growth.
This is central for jobs, for lowering debt, for delivering services and building infrastructure for a 21st century economy. Let us chart a new course for the economy and well-being of all South Africans, particularly for those hardest hit by unemployment – the low-skilled and the youth. This is not only crucial to address social imbalances and inequality, it is also fundamental to encouraging investment.
The recent tremors felt by emerging markets are a warning that we need to take corrective steps urgently or we will be worse off. At the same time, we need to move forward to mobilise the resources and capacity of all our people, large and small enterprises, civil society organisations and public-private partnerships.
The joint actions we need will not always be easy. All too often, bureaucrats and businesspeople speak past each other; the needs of the young are not the same as those of the elderly; the rhythms of the township differ from those of the suburb. Race, class and language differences interfere with progress, even when we have shared aspirations. We need to bridge these divides.
Yet we are resilient, we are committed, we are resourceful.
We can turn today’s adversity into opportunities.
We can address the weaknesses that create policy uncertainty, we can build on the strengths that are our resource base, our institutions and our workforce. We can do things differently where we need to innovate.
We have avoided reckless policies which might have dragged us into recession or reversed the capital flows we need. We have a sound macroeconomic and fiscal framework, and the will to work together for faster and inclusive growth.
Allow me to thank you, Mister President and Minister Deputy President, for your leadership and support. I must also thank Cabinet colleagues for your contributions to addressing the challenges before us.
Members of the Ministers’ Committee on the Budget, including Deputy Minister Jonas, have provided sterling support.
I thank our Provincial Premiers and Finance MECs, and Municipal Mayors, who share our fiscal and financial responsibilities.
Please join me in expressing appreciation to:
- Director-General Lungisa Fuzile and officials of the National Treasury;
- Governor Kganyago, the Deputy Governors and staff of the South African Reserve Bank;
- Commissioner Moyane and staff of the South African Revenue Service;
- Commissioners and staff of the Financial and Fiscal Commission;
- The Chairpersons, Boards, Chief Executive Officers and staff of the DBSA, the Land Bank, the Public Investment Commission, the Financial Services Board, the Financial Intelligence Centre and the Government Pension Administration Agency;
- The staff and constituency representatives of NEDLAC, and particularly its Public Finance Chamber, and
- Judge Dennis Davis and members of the Tax Committee.
I am especially grateful to the chair of the finance committee, the honourable Carrim, acting chair of the appropriation committee, honourable Gcwabaza and chairs of the select committee on finance and appropriation, honourable de Beer and honourable Mohai, who have responsibility for facilitating the consideration of the Division of Revenue Bill and the Appropriation Bill, and the revenue bills which will be tabled later in the year.
We are resilient. We are committed. We are resourceful.
Looking back on his extraordinary life of resilience, and of commitment, former President Mandela said this: “I am fundamentally an optimist. Whether that comes from nature or nurture I cannot say. Part of being optimistic is keeping one’s head pointed toward the sun, one’s feet moving forward. There were many dark moments when my faith in humanity was sorely tested, but I would not and could not give myself up to despair. That way lays defeat and death.”
Nico Theron MTP (SA) (BCom Law (cum laude); BCom Honours Taxation; MCom Taxation (SA and International Tax)) covers the latest tax developments in a monthly webinar presented on behalf of the South African Institute for Tax Practitioners. The next webinar is scheduled for 17 March 2016 from 15:00 to 17:00 and the following topics are up for discussion:
- Draft Interpretation Note on the taxation of foreign dividends and archive of IN2.
- IN2 was issued 2009 (various subsequent changes).
- BCR 050 – Tax consequences for unitholders in a REIT of an amalgamation transaction, followed by an asset-for- share transaction.
- Issue 4 of Interpretation Note 19 – year of assessment ending on a day other than February for natural persons and trusts.
- Issue 2 of BGR 24 Section 18A(2).
- BPR219 Corporatisation of a collective investment scheme in property and an amalgamation followed by an asset-for-share transaction.
- Retirement reform example.
- BCR 051 – Taxation of employees participating in a perpetuity employee share incentive scheme.
- BPR 220 – Contribution by a mining company to a trust pursuant to a share incentive scheme.
- BPR 221 – Deductibility of the cost of assets to be acquired to construct roads.
- BPR 223 – Headquarter companies: Acquisitions of shares and loans.
- BPR 222 – Foreign partnership – Rebate in respect of foreign taxes on income.
- Draft Interpretation Note on the deduction for energy-efficiency savings.
- Interpretation Note 88 – Tax deduction for amounts refunded.
- Interpretation Note 87 – Headquarter companies.
- Draft binding general ruling on alternative documentary proof acceptable to the commissioner to substantiate a vendors entitlement to a deduction under section 16(3) (South African Jazz Festival).
For details on how and where to register for these webinars, please visit www.thesait.org.za.
015 Webinar: VAT for NPOs
|When:||29 October 2015
From 15:00 until 17:00
|Where:||Webinar online session
Presented live fromSouth Africa
|Online registration is available until: 2015/10/27|
Highlights of 2015 Budget Speech by Finance Minister Nhlanhla Nene
- Today’s Budget is constrained by the need to consolidate public finances in the context of slower growth and rising debt.
- Treasury received around 400 tips from the public – two areas dominated: concerns about public service delivery; and advice on tax.
- The 2015 Budget Review documentation is structured differently, increasing transparency. There is a new section on the financial position of public sector entities and an annexure on the progress in infrastructure spending.
- SA’s economic growth forecast has been reduced to 2% from 2.5% projected during the Mini Budget in October. Growth expected to rise to 3% by 2017. SA will benefit from the lower oil price but commodity exports softer.
- Best prospects for growth in the short term lies in less-energy intensive sectors such as tourism, agriculture, light manufacturing and housing construction. Government efforts to support these sectors have been intensified.
- SA inflation as measured by the CPI peaked at 6.6% in June 2014; is dropped to 4.4% last month and is expected to average 4.3% in 2015.
- Although SA’s fiscal position is constrained, there are three major strengths on which the country’s growth strategy can be built: Low interest rates; trade competitiveness enhanced by the weaker exchange rate; well capitalised banks and other financial institutions and strong legal and tax frameworks.
Budget Framework and fiscal policy
- Fiscal room created during the boom leading up to the Global Financial Crisis enabled Government to push expenditure and widen the Budget Deficit and cushion the country from a potential hard landing. But this resulted in an increased debt burden and substantial repayments are coming due.
- Fiscal rebalancing is now a priority – it has included cost containment measures, and intensified efforts to improve expenditure efficiencies. But it has become apparent tax increases can no longer be postponed. The financial health of households and businesses is the primary consideration in the selection of tax options.
- As outlined in October’s MTBP Statement, the key features of the budgeting framework are:
- Dropping 2014’s expenditure ceiling by R25bn over two years.
- Increasing taxes by R17bn in 2015/16.
- Revising spending plans across all of the public sector.
- Consolidating public sector employee numbers.
- Financing SOEs where required without increasing the Budget Deficit.
- In this 2015/16 Budget, a consolidated Budget Deficit of 3.9% of GDP is projected, falling to 2.5% in 2017/18.
- Government spending excluding interest repayments will rise from 2015/16’s R1.123 trillion to R1.4 trillion in 2017/18, an average increase of 2.1% a year.
- The share of spending on personnel will stay at 40% of non-interest spending.
- Interest payments on State debt will rise from R115bn this year to R153bn in 2017/18.
- Government spending on goods and services to be limited to a maximum of 5% a year.
- Spending on catering, entertainment and venues to be reduced by 8% in real terms; travel and subsistence by 4%.
- Spending on school books, medicine, fuel for SAPS vehicles and equipment maintenance to rise by more than inflation.
- The Budget includes an unallocated contingency reserve of R5bn this year; R15bn in 2016/17 and R45bn in 2017/18 allowing for new priorities to be accommodated.
- Over the next three years Government’s gross debt stock is projected to rise by R550bn to R2.3 trillion. Redemptions of debt issued in the past decade will add R190bn to the medium term borrowing requirement.
- Government debt to GDP ratio is expected to stabilise at 45% in three years’ time. The liquid domestic market and SA’s standing in global capital markets means the borrowing requirement can be met provided the prudent Budget framework is maintained along with improvements in savings and investment
Medium term expenditure and division of revenue
- The National Government’s share of non-interest expenditure is 48%; provinces receive 43% and 9% is allocated to municipalities.
- Basic services has been priorities for municipalities. A review of local Government infrastructure grants is being conducted to produce a simpler framework and consolidated financing requirements.
- Support for the Oceans Economy has been prioritised with R296m allocated over the next three years to enhance climate change research and management of ocean resources.
- The Square Kilometre Array (SKA) astronomy partnership will receive R2.1bn over the next three years.
- Investment in mining and petroleum beneficiation projects will receive R2.7bn over the next three years.
- An allocation of R108m has been made for research and for drafting regulatory requirements for licencing shale gas exploration and fracking.
- Support for agricultural development is strengthened through a R7bn allocation to provinces over the next three years. Access to finance for emerging farmers will be expanded in collaboration with the Land Bank.
- Since 2008, 1 459 farms have been supported and 4.3m hectares acquired for redistribution. A further 1.2m hectares will be acquired in the next three years with R4.7bn allocated to recapitalise and develop farms.
Employment and enterprise development
- Unemployment remains SA’s single greatest economic and social challenge. Government measures include tax incentives for employment and investment, support for enterprise development, skills development and employment programmes.
- 2billion has been allocated over the MTEF period to manufacturing development incentives and support for growing service industries, such as business process outsourcing. The manufacturing competitiveness enhancement programme will spend R5.4 billion and will assist 1 450 companies with financial support to upgrade facilities and skills development.
- Special economic zones are allocated R3.5 billion over the medium term, mainly for infrastructure development.
- The new Small Business Department will spend R3.5 billion on mentoring and training support to small businesses.
- The Jobs Fund will spend R4 billion in partnership with the private sector on projects that create new employment, support work-seekers and address structural constraints to more inclusive growth.
- The community work programme will be extended to all municipalities. Its allocations increase by 21 per cent a year.
- The Department of Environmental Affairs has an allocation of R11.8 billion to fund more than 107 000 full time equivalent jobs and 224 000 work opportunities through environmental EPWP programmes.
- A total of R590 million has been allocated to the Green Fund over the medium term, for strategic environmental projects in partnership with the private sector.
Health and social protection
- Health spending will reach R178 billion in 2017/18.
- The ARV treatment programme now reaches 3m patients. Mother- to-child transmission of HIV has decreased from 20% a decade ago to 2% last year.
- 5 billion is shifted from provincial budgets to the national Department of Health to enable the National Institute of Communicable Diseases to be directly funded.
- Progress has been made over the past year in preparing for the transition to national health insurance. A discussion paper on financing options will be released shortly by the National Treasury, to accompany the NHI white paper.
- Social assistance beneficiaries numbered 16.4 million in December 2014. In order to accommodate the growth in numbers, the budget proposals include an additional R7.1 billion on the Social Development vote.
- With effect from 1 April the old age, war veterans, disability and care dependency grants will increase by R60 a month to R1 410; child support grants increase to R330; foster care grants increase by R30 to R860.
Education, sport and culture
- The number of qualified teachers entering the public service is projected to increase from 8 227 in 2012/13 to 10 200 in 2017/18 with R3.1 billion in bursaries allocated to improve teacher training.
- A total of170 million workbooks will be distributed to 23 562 public schools over the three next years. Each learner in Grades R to 9 will receive two books per subject each year in numeracy, mathematics, literacy, language and life skills.
- The school infrastructure backlogs programme is allocated R7.4 billion for the replacement of over 500 unsafe or poorly constructed schools, as well as to address water, sanitation and electricity needs. All schools will meet the minimum norms and standards for school infrastructure by 2016. The budget also includes R4.1 billion over the MTEF period to build and support public libraries.
- School and community sport programmes and sports academies will receive R1.7 billion in conditional allocations to provinces.
Post-school education and training
- Allocations to post-school education and training exceed R195 billion over the medium term, increasing at an annual average of 7.1 per cent.
- University operating subsidies will amount to R72.4 billion. Transfers to universities for infrastructure of R10.5 billion are proposed, including R3.2 billion for the new universities of Mpumalanga and Sol Plaatje.
- The National Student Financial Aid Scheme is projected to spend R11.9 billion in 2017/18, up from R9.2 billion in 2014/15.
Transport, energy and communications
- Over the next three years R1.1 billion is allocated for the upgrade of the Moloto Road to improve safety and mobility on this road.
- The Passenger Rail Agency’s R53 billion ten-year renewal programme is in progress – the first 44 new train sets, or 528 coaches, will be delivered over the next three years.
- Over R80 billion is allocated to over 220 water and sanitation projects and for local roads.
- R105 billion will be spent on housing and associated bulk infrastructure requirements.
- Over R18 billion in electrification funding will provide for 875 000 households to be connected to the grid or to receive off-grid electricity.
- 1 billion is allocated for broadband connectivity in government institutions and schools.
- Concerns regarding the socio- economic impact of eTolls in Gauteng have been heard, and revised monthly ceilings will shortly be proposed. There will be a national contribution to meeting the associated cost. Measures will also be taken to ease compliance and improve enforcement. But cost recovery from road-users will continue to be the principal financing mechanism for this major road system.
Transforming urban areas
- Amendments will be proposed to the Municipal Fiscal Powers and Functions Act to clarify the rules surrounding bulk infrastructure charges, and ensure an equitable and transparent system of contributions by land developers.
- Metropolitan councils will announce details of their investment programmes in their forthcoming budget statements. The Treasury, the Department of Cooperative Governance and the Development Bank of Southern Africa will host a conference on urban infrastructure investment later this year to enable private investors to obtain further details of financing opportunities that will arise from this new programme.
- Allocations for water, sanitation and electricity in rural municipalities have been increased substantially. R4.3 billion will be spent over the next three years to build capacity and strengthen systems for financial management and infrastructure delivery.
Defence, public order and safety
- Government spending on public order and safety and on defence will continue to increase, from R163 billion this year to R193 billion by 2017/18. Police services receive about 48 per cent of the total allocation.
- Over the medium term, a total amount of R492 million has been reprioritised towards improving access to justice. This will increase capacity for court support personnel, public defenders and prosecutors.
- In order to strengthen the independence of the judiciary, the Office of the Chief Justice has been established as a new department. It becomes fully operational on the 1st April 2015, with a budget over the MTEF period of R5.2 billion.
- The fight against corruption remains a central priority. Additional allocations have been made to the Public Protector and the Financial Intelligence Centre for increasing their human resource capacity.
- Budget provision for border safeguarding and regional security amounts to R2.8 billion and R4.5 billion, respectively, over the next three years.
Financial management: ensuring value for money
- National Treasury review of public sector supply management was published last month, and is a candid reflection of our current state of public sector procurement, the reforms that are needed and the opportunities that an efficient, transparent SCM system presents.
- In future, all books delivered to schools from January 2016 will be managed through a centrally negotiated contract and all school building plans will be standardised and the cost of construction will be controlled by the Office of the Chief Procurement Officer.
- Routine maintenance of school buildings and minor construction works will be decentralised. This will be accompanied by measures to combat inefficiency and corruption at district and school level.
- From April 2015, a central supplier database will be introduced. Suppliers will only be required to register once when they do business with the state. This will significantly reduce the administrative burden for business, especially small and medium-sized enterprises. The database will interface with SARS, the Companies and Intellectual Property Commission and the payroll system. It will electronically verify a supplier’s tax and BEE status, and enable public sector officials doing business with the state to be identified.
- A central e- tender portal will be implemented from April this year. It will be compulsory that all tenders be advertised on this portal, and all tender documents will be freely available there.
- Government has committed to settle accounts from small businesses timeously – payment of suppliers within 30 days will now be included among other SCM requirements in the performance agreements of accounting officers.
- The current projection is that tax revenue will amount to R979 billion in 2014/15, or about R14.7 billion less than the budget estimate a year ago. Budget revenue will be R1 091 billion this year, or about 8.2 per cent more than in 2013/14.
- The 2015 Budget tax proposals aim to increase tax revenues as required, limit the erosion of the corporate tax base, increase incentives for small businesses and promote a greener economy.
- Personal income tax rates will be raised by one percentage point for all taxpayers earning more than R181 900 a year. However, tax brackets, rebates and medical scheme contribution credits will be adjusted for inflation, as in previous years. The net effect is that there will be tax relief below about R450 000 a year, while those with higher incomes will pay more in tax.
- An increase in the general fuel levy of 30.5 cents a litre will take effect in April.
- Following recommendations of the Davis Committee, a more generous tax regime is proposed for businesses with a turnover below R1million a year. Qualifying businesses with a turnover below R335 000 a year will pay no tax, and the maximum rate is reduced from 6 per cent to 3 per cent.
- The rates and brackets for transfer duties on the sale of property will be adjusted to provide relief to middle-income households. The new rates eliminate transfer duty on properties below R750 000, while the rate on properties above R2.25 million will increase.
- Excise duties on alcoholic beverages and tobacco products will again increase:
- the tax on a quart of beer goes up by 151⁄2 cents,
- a bottle of wine will cost 15 cents more,
- a bottle of sparkling wine goes up by 48 cents,
- a bottle of whisky will be R3.77 more;
- a pack of 20 cigarettes goes up by 82 cents.
- The net effect of these proposals on 2015/16 tax revenue is an increase of R8.3 billion, which will bring tax revenue for the year to R1 081 billion, or about 10.4 per cent more than 2014/15 tax revenue.
Further tax proposals
- A temporary increase in the electricity levy, from 3.5c/kWh to 5.5c/kWh, to assist in demand management. This additional 2c/kWh will be withdrawn when the electricity shortage is over.
- Secondly, an increase is proposed in the energy-efficiency savings incentive from 45 c/kWh to 95 c/kWh, together with its extension to cogeneration projects. Other measures under consideration include enhancing the accelerated depreciation for solar photovoltaic renewable energy.
- The introduction of a carbon tax in 2016 will provide an additional tool to deal more sustainably with the current electricity shortage, while lowering the electricity levy. A draft carbon tax bill will be introduced later this year for a further round of public consultation.
- Amendments will be proposed to improve transfer-pricing documentation and revise the rules for controlled foreign companies and the digital economy.
- The Road Accident Fund levy is increased by 50c a litre from the present levy of R1.04. It is required in order to finance the progress made by the RAF administration in clearing the claims backlog. It also reflects the unsustainability of the current compensation system, which has accumulated a R98 billion unfunded liability. Legislation to establish the new Road Accident Benefit Scheme will be tabled this year.
- The second special revenue proposal is a one-year relief measure in respect of Unemployment Insurance Fund contributions. Unlike the Road Accident Fund, the UIF has an accumulated surplus of over R90 billion. The contribution threshold will be reduced to R1000 a month for the 2015/16 year. This means that employers and employees will each pay R10 a month during the year ahead, putting R15 billion back into the pockets of workers and businesses.
Financial position of public sector institutions
- To stabilise Eskom’s financial position, it will apply to the regulator this year for adjustments towards cost-reflective tariffs. In October 2014 we announced a broad package for Eskom, including a capital injection of R23 billion, governance improvements, operational cost containment and additional borrowing and support for required tariff increases. If further support is deemed necessary, consideration will be given to an equity conversion of government’s subordinated loan to Eskom.
- Government has also stepped in to address the financial position of South African Airways. SAA reported a net loss of R2.6 billion in 2013/14, as a result of high operating costs, losses on several international routes and valuation adjustments. We have made guarantees of R14.4 billion available to SAA, of which the airline has drawn R8.3billion. Measures to achieve operational efficiencies and restore profitability are now in progress.
- Guarantees have also been provided to the South African Post Office, subject to implementation of its turnaround strategy. This involves revised universal service obligations and delivery targets, taking into account the decline in the mail and courier business and the shift to digital communication.
Development finance institutions
- The DBSA will take the lead in developing South Africa’s municipal debt market in order to accelerate both public and private sector investment in urban renewal.
- The IDC aims to mobilise R100 billion over the next five years to promote faster industrial development, mineral beneficiation and agro-processing.
- The Independent Power Producer Programme will be extended to include new generation capacity from hydro, coal and gas sources to complement Eskom’s base- load energy capacity. Co-generation and demand management initiatives are also being supported.
- The Government Employees Pension Fund remains well-funded and soundly managed. Pensioners of the GEPF, the Associated Institutions Pension Fund and the Temporary Employees Pension Fund, as well as recipients of special and military pensions, will receive a 5.8 per cent pension increase with effect from April 2015.
Financial sector reforms
- From 1 March 2015, the new tax free-savings accounts will be available.
- Significant progress has been achieved in relation to retirement reforms, and consultations with NEDLAC will continue. The first draft of default regulations will be issued shortly for public comment.
- The bill establishing two new regulatory authorities, the so-called “twin peaks” reform, will be tabled this year. We have strengthened regulations for banks, and will be doing so this year for insurers, derivatives and hedge funds. We will be taking steps to strengthen the supervision of large financial groups and collective investment schemes, particularly money market funds.
- Under its curatorship, African Bank is now generating positive cash flows. We announced a R7 billion backstop last year, but our expectation is that the bank will be stabilised without recourse to taxpayer funds.
- The problem of excessive household indebtedness remains a serious challenge. Approximately 45 per cent of credit-active consumers have impaired credit records. This results in part from poor market conduct by lenders and financial advisors. Government welcomes initiatives of employers in the private sector who have audited garnishee orders applied to their employees, and have taken steps to identify illegally-issued orders.
Tax Indaba 2015
2015/09/07 to 2015/09/11
|When:||7 – 11 September 2015
From 08:00am until 17:00pm
|Where:||Sandton Convention Centre
161 Maude Street
Johannesburg, Gauteng 2169
Basic Remuneration Workshop
We are the first to be accredited through the South African Reward Association, to provide training on our Basic Remuneration Workshop.
The Basic Remuneration Workshop is a two (2) day workshop that will provide delegates with a comprehensive overview on the latest remuneration practices and principles. The workshop has been designed to provide practical knowledge and know-how on best practice around job design, creating pay scales, job evaluation, Cost-to-Company conversions and total reward statements. A part of the course is also underpinned by how to deal with employment equity issues specifically relating to reward. The workshop is ideally suited for Reward Analysts, those entrants to the reward profession and anyone who needs to upskill on the latest methodologies of reward.
The workshop is structured to focus on three different areas –
Elements of a remuneration structure and the importance in the total rewards design. The concepts and elements of total rewards are broadly explained but the focus is then placed on remuneration (fixed and variable) and the different fixed/guaranteed remuneration structures;
Job design. Job profiling, job grading and specifically the Paterson job grading procedure is explained. The workshop continues to explain how to establish a job worth hierarchy from the grading of positions into either a composite or job family/functional area structure.
Structured remuneration and benefits system. This part of the workshop discusses the importance of structure in the reward system; from articulating the company reward philosophy and strategy to developing the reward program policies. During this section of the workshop emphasis is placed on selecting and understanding remuneration and benefits surveys, basic remuneration related statistical concepts as well as pay scale design and management.
The next workshop will be hosted in Cape Town by Remuneration Consultants South Africa on 20-21 August 2015
The fees for the workshop are outlined below:
Non-SARA Member – R4 280.00 (excluding VAT per delegate);
SARA Member – R3 480.00 (excluding VAT per delegate);
Group Discount – Register 4 delegates from your company and get the 5th seat for free.
Please note that if registration is not cancelled at least 5 days before the 2 day workshop or if a delegate is a ‘No Show’ they will be held liable for the full fee.
If you or any persons within your organisation you would like to attend this workshop, please provide us with the information requested below and we will keep you posted on available workshop dates, alternatively please contact Paul Marais on 073 222 5127.
Wrigley Field Building
The Campus Business Park
57 Sloane Street
Tel: +27 (0) 11 467 0810
- UIF Contributions Law ChangeMarch 23, 2018 - 11:20 am
- Budget Speech 2018/2019 – VAT Pocket GuideFebruary 23, 2018 - 6:40 am
- SARS has Issued Interpretation Note 98February 15, 2018 - 1:31 pm
- SARS Binding General Ruling (VAT) 43November 13, 2017 - 8:57 am
- SARS Binding Private Ruling 278November 13, 2017 - 8:55 am
- Annual SARA Tax and Budget Update 2018February 27, 2018 - 6:40 am
- 2016 Dispute Resolution – 11 August 2016July 7, 2016 - 1:10 pm
- 2016/07/21 – Monthly Tax Technical WebinarJuly 5, 2016 - 2:27 pm
- 2016/09/05 – Tax Indaba 2016June 9, 2016 - 10:01 am
- 2016/02/24 – National Budget SpeechFebruary 25, 2016 - 12:41 pm
- Why SARS Shortened the Filing Season and the Impact ThereofJune 7, 2018 - 1:20 pm
- Transfer Pricing – South African jurisprudence Breaks GroundJune 1, 2018 - 12:46 pm
- SARS and NPA to Prosecute Taxpayers for Non-ComplianceApril 17, 2018 - 10:13 am
- SARS’ new rule: Is travel compensation still worth the chase?April 11, 2018 - 10:18 am
- How to survive SARS audits and get the best outcomeApril 10, 2018 - 8:28 am