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The budget speech and TAX: Here's what you need to know

by , 29 February 2016
Every year, the annual budget speech is a much-anticipated occasion, with everyone from your neighbour to the economist arguing and debating.

After the budget speech took place yesterday afternoon.

2016 has already seen some stir in the mere 'form' of budget speech's announcer, from the axing of
Nene, to the short-lived Van Rooyen reign, until finally the baton was passed back to Mr. Gordhan.

And the content of the speech, particularly in the tax arena, has lit some matches.

Mr. Gordhan made it clear the importance of what he terms 'inclusivity' in the tax system, which in turn affects its design, and that in order to raise additional revenue and to reduce the budget deficit, 'special' attention has been paid to the tax system. In other words, certain changes and updates were believed necessary.

So what exactly was said on tax in the country? Let's take a look...

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Tax proposal#1:

Personal income tax relief of R5.5 billion which partially makes up for inflation, and is focussed more on lower and middle-income earners

Tax proposal#2:

An increase in the monthly medical tax credit allowance

Tax proposal#3:

In increase of R0.30 in the general fuel levy

Tax proposal#4:

The introduction of a tyre levy in order to finance recycling programmes, as well as increases in the incandescent globe tax, the plastic bag levy and the motor vehicle emissions tax.

Tax proposal#5:

The introduction of a tax on sugar-sweetened beverages (drinks).

Tax proposal#6:

Increases of between 6 to 8.5% in the duties on alcohol and tobacco products.
 
Important notes from the finance minister:

In addition to those proposals, Gordhan mentioned the following:

·         Industry-based training organisations, in the list of things qualifying for tax exemption, are being considered.

·         That aggressive action will be taken against those who evade tax through transfer pricing abuses, misuse of tax treaties and illegal money flows;

·         As of 2017, Information sharing, through international agreements, will assist the tax authorities to act against any abusive tax practices by multinational corporations and wealthy individuals;

·         For all taxpayers who have undisclosed assets abroad, time is running out, and that additional relief will be offered for a six-month period, from October this year, to allow for non-compliant taxpayers to sort out their affairs. The government has published a draft bill on their website relating to voluntary disclosure etc.

·         Higher capital gains inclusion rates, as well as an increase in the amount above which capital gains become taxable.

·         The transfer-duty rate on properties exceeding R10 million will increase from 11% to 13%; and

·         Proposals to strengthen the estate duty and donations tax.
 
What about wealth tax?
 
If there's one topic which has proved to be hot on the minds of many, it's the wealth -tax question.

After last year's visit to South Africa by a French economist, namely Thomas Piketty, it spears that the term 'wealth tax' has become somewhat of a catchphrase in the country.

Piketty proposed a wealth tax framework which South Africa should implement in order to balance out what has been termed gross inequality by many. And ever since South Africa has been locked in strong debate over whether or not it should be implemented.

In his budget speech, Gordhan did confirm that a wealth tax is currently under review by the Davis Committee.
 
So what now?

As can be seen, many changes are on the verge of taking place in the South African tax system, and so you simply CANNOT AFFORD to move forward without someone, or SOMETHING, to guide you along the way.

That's why we have the Practical Tax Loose Leaf Service!
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