Rea­sons to be cheer­ful on tax front

Business Day - Business Law and Tax Review - - BUSINESS LAW & TAX REVIEW -

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.

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