Reasons to be cheerful on tax front
IN THE words of Queen Elizabeth, 2015 was an annus horribilis for SA. When she made this comment about 1992, she only had “Camillagate” and “Squidgygate” to contend with when Charles and Diana’s respective love lives were laid bare.
We had many more problems to deal with in our country last year. And that is why this article, coming as it does at the beginning of 2016, is dedicated to optimism. It’s a new year and everyone is weary of all the negative sentiment that dominated last year.
So, on the tax front, what are the reasons to be cheerful this year?
First, the global topic of base erosion and profit shifting (BEPS) which is dominating discussions in the tax world. Agree with it or not, the Organisation for Economic Cooperation and Development’s focus on BEPS is intended to level the global tax playing field and reduce abusive tax practices. SA, through the Davis tax committee, is part of this global debate and will be implementing certain of these initiatives.
Every year pre-Budget tax pundits predict that various tax rates will be increased. And virtually always they are proved to be incorrect.
Our corporate tax rate of 28% and VAT rate of 14% have remained constant for years and are competitive, in particular for a developing country. Our effective rate of capital gains tax (13.65% for individuals, 18.65% for companies and 27.31% for trusts) are also relatively competitive, particularly in respect of individuals.
It is interesting that the company tax contribution to the total tax take in 2014-15 was 18.9%. Personal income tax amounted to 35.9% of the total capital are R986.3bn collected.
VAT collected 26.5% of the total tax take in 2014-15.
Wouldn’t it be great if we could reduce our tax-to-GDP ratio from 25.7% in 2014 since this does not compare favourably with other jurisdictions. Wouldn’t it also be great if this was done by increasing GDP and keeping our tax rates as they are.
We have a comparatively sophisticated and efficient tax compliance system and a revenue service that generally engages constructively with taxpayers and tax advisers and operates in an efficient manner. For example, the advance tax ruling unit recently provided various clients with positive binding rulings in a timely, friendly and pragmatic manner. This tax certainty assists enormously in facilitating merger and acquisition activity in the market.
Here’s to 2016 being a good year for all taxpayers.
Everyone is weary of the negative sentiment — so let’s take an optimistic view
Bernard du Plessis is a tax executive and Peter Dachs a tax director in ENSafrica’s tax department.