Bud­get

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Lat­est from the an­nual Bud­get Speech

NOT WITH­STAND­ING THE TOUGH ECO

NOMIC CON­DI­TIONS, Fi­nance Min­is­ter Pravin Gord­han and his trea­sury of­fi­cials had a pleas­ant sur­prise for South Africans: no tax in­creases – at least not in this year’s Bud­get.

Given the R16bn loss in tax rev­enue, cou­pled with weak eco­nomic growth dur­ing the sec­ond half of 2012, dis­rup­tions in the min­ing sec­tor and lower com­mod­ity prices, eco­nomic an­a­lysts widely ex­pected that Gord­han would have no other choice but to raise per­sonal in­come tax and com­pany tax. “You all an­tic­i­pated that tax in­creases,” Gord­han told the me­dia at a brief­ing ahead of his Bud­get Speech on Wed­nes­day af­ter­noon. “But it didn’t hap­pen.” Next year could be a dif­fer­ent story, though. An ex­ten­sive re­view of South Africa’s tax pol­icy frame­work is un­der­way, which could mean in­creases in com­pany taxes, VAT or per­sonal in­come tax at next year’s Bud­get. “An as­sess­ment of the tax regime is nec­es­sary to sup­port the long-term ob­jec­tives of the coun­try – es­pe­cially the ones set out in the Na­tional Devel­op­ment Plan (NDP),” Gord­han said. The tax rev­enue com­mit­tee con­duct­ing the re­view will be headed by High Court Judge Dennis Davis and its find­ings will be an­nounced when Gord­han de­liv­ers his Mid-term Bud­get Pol­icy State­ment in Oc­to­ber this year.

Th­ese are the main points in the 2013 Bud­get Re­view:

The main ap­pro­pri­a­tion for this year’s Bud­get is just more than R1tr. Debt ser­vic­ing costs will be R100bn, and R4bn is set aside as a con­tin­gency re­serve for un­fore­see­able and un­avoid­able ex­pen­di­ture, such as new pro­grammes or for dis­as­ter re­lief. This leaves R951bn to be dis­trib­uted among the na­tional, pro­vin­cial and lo­cal government spheres.

Na­tional de­part­ments will re­ceive 47.6%, prov­inces will be al­lo­cated 43.5% – mainly for ed­u­ca­tion, health and so­cial wel­fare – while lo­cal government will get 8.9% for pro­vid­ing ba­sic ser­vices for low-in­come house­holds.

Gord­han ac­knowl­edged that many prov­inces do not al­ways spend their in­fras­truc­tural grants, and hence­forth pro­vin­cial au­thor­i­ties will need to sub­mit build­ing plans two years ahead of im­ple­men­ta­tion and they will only re­ceive fund­ing if their plans meet cer­tain cri­te­ria. TAX RE­LIEF FOR COM­PA­NIES AND IN­DI­VID­U­ALS In­di­vid­u­als can heave a sigh of re­lief as they’ll get a R7.3bn tax break in per­sonal in­come tax, while busi­nesses got an R860m re­prieve. In­cen­tives through the tax sys­tem will also be in­tro­duced to em­ploy­ees to en­cour­age them to em­ploy young work­ers. PRI­VATE SEC­TOR AND SMALL BUSI­NESSES Government ac­knowl­edges the role the pri­vate sec­tor plays in its re­al­i­sa­tion of strong cap­i­tal in­vest­ment projects and there­fore it en­cour­ages busi­nesses to keep in­vest­ing in the econ­omy.

“We ac­knowl­edge small-busi­ness fi­nanc­ing must be sup­ported to a greater ex­tent than is cur­rently done,” Gord­han said. The fi­nanc­ing of SMMEs has been sim­pli­fied with the es­tab­lish­ment of the Small En­ter­prise Fi­nance Agency last year, and the agency will re­ceive R450m over three years. At the same time, Government is sim­pli­fy­ing the tax re­quire­ments for small busi­nesses – the turnover thresh­old will be in­creased and the grad­u­ated rate struc­ture will be re­vised.

To en­cour­age pri­vate busi­nesses to ex­pand into Africa, Government will also make sim­pler rules that re­duce the time and cost of do­ing busi­ness in Africa. “Th­ese mea­sures in­clude the re­lax­ation of cross­bor­der fi­nan­cial reg­u­la­tions and tax re­quire­ments in com­pa­nies that will make it eas­ier for banks and other fi­nan­cial in­sti­tu­tions to in­vest and op­er­ate in other coun­tries,” Gord­han said. FI­NAN­CIAL SER­VICES AND RE­TIRE­MENT RE­FORM In­di­vid­u­als’ con­tri­bu­tions to pen­sion and re­tire­ment funds are tax de­ductible, and to en­cour­age th­ese con­tri­bu­tions and sav­ing for re­tire­ment, the de­ductibil­ity rate will be in­creased to 27.5%. There will also be a har­mon­i­sa­tion of the tax treat­ment of con­tri­bu­tion to pen­sion, re­tire­ment an­nu­ity and prov­i­dent funds, which will al­low prov­i­dent fund mem­bers to now also get a tax de­duc­tion on their own con­tri­bu­tions. Government will also in­tro­duce tax-pre­ferred sav­ings and in­vest­ment ac­counts in 2015. TAX LEVIES

On 3 April 2013, the gen­eral fuel levy will rise by 15c a litre to 23c a litre. The Ac­ci­dent Fund levy will in­crease by 8c to 96c a litre of petrol.

From 1 April mo­tor ve­hi­cle CO emis­sions tax will also be in­creased from R75 to R90 for pas­sen­ger cars for ev­ery gram of emis- sions per km above 120g CO /km. For dou­ble cabs it will in­crease from R100 to R125 for ev­ery gm/km above 175g CO /km.

Government also in­tends in­tro­duc­ing a car­bon tax to mit­i­gate the ef­fects of cli­mate change. This will be im­ple­mented from 1 Jan­uary 2015. A car­bon tax at the rate of R120 a ton of CO equiv­a­lent is pro­posed, and a pol­icy pa­per set­ting out the de­tails will be pub­lished at the end of March 2013. Some of the rev­enues gen­er­ated from this tax will be used to fund the en­ergy-ef­fi­ciency tax in­cen­tive.

The levy on plas­tic shop­ping bags will rise from 4c to 6c a bag from 1 April 2013, while the levy on in­can­des­cent light bulbs will in­crease from R3 to R4 a bulb. This is to en­cour­age con­sumers to use en­ergy-ef­fi­cient light bulbs. SIN TAXES In the 2013 Bud­get, Government pro­poses to in­crease ex­cise du­ties for al­co­holic bev­er­ages and cigarettes as fol­lows: Malt beer – up by 7.5c to R1.08/340ml can; For­ti­fied wine – up by 19.5c/750ml bot­tle; Un­for­ti­fied wine – up by 15c/750ml bot­tle; Sparkling wine – up by 56c/750ml bot­tle; Ciders and al­co­holic bev­er­ages – up by 7.3c/330ml bot­tle;

Spir­its – up by R3.60 to R39.60/750ml bot­tle;

Cigarettes – up by 60c to R10.92/packet of 20;

Pipe to­bacco – up by 32c to R3.54/25g. THE STATE OF OUR ECON­OMY The NDP is the de­par­ture point of this year’s Bud­get and tar­gets an an­nual eco­nomic growth rate of over 5%, Gord­han said. But the re­al­ity is that growth is much more sub­dued at an ex­pected rate of 2.7%/year ris­ing to 3.8% in 2015. In­fla­tion is ex­pected to re­main mod­er­ate and it is pro­jected to in­crease by an av­er­age of 5.5% over the next fi­nan­cial year. This leaves Government with a rev­enue short­fall of R16.3bn, and the Bud­get deficit is now es­ti­mated at 5.2% of GDP in 2012/2013. Government debt is ex­pected to sta­bilise at marginally higher than 40% of GDP.

Government in­tends to re­main within its ex­pen­di­ture ceil­ing set out in this year’s Bud­get, although in­creases in spend­ing, such as on am­bi­tious in­fra­struc­ture projects, will re­quire cor­re­spond­ing rev­enue in­creases.

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