Acts set effective dates for Budget 2018 tax changes
THE SIGNING of three tax bills into law by President Cyril Ramaphosa on Thursday brought to an end the 2018 legislative cycle and set the effective dates for the tax changes proposed in the February Budget.
The acts give effect to significant tax proposals, including the increase in the VAT rate from 14 percent to 15 percent as well as the introduction of additional zero-rated items such as cake and bread flour, and sanitary pads.
The acts include the Rates and Monetary Amounts and Amendment of Revenue Laws Act, the Taxation Laws Amendment Act and the Tax Administration Act.
Patricia Williams, a partner at law firm Bowmans, says there were originally several very controversial aspects, however National Treasury and Parliament went to significant lengths to consult on the proposals that attracted material comments.
“I was really quite impressed with the dedication towards the consultation process. In the end, the more problematic proposals were either withdrawn or considerably amended.”
National Treasury said in a statement issued on Friday that the Tax Administration Laws Amendment Act also contains a consequential amendment, which requires the finance minister to evaluate the impact of the VAT rate increase on revenue collection and the poor.
It is expected that the minister will table a report in Parliament by no later than June 30, 2021.
The independent panel of experts, appointed by former minister Nhlanhla Nene to consider additional items that could be zero-rated to mitigate the impact of the increase on the poor, released their report in August last year.
The panel recommended the zero rating of six additional items which would have cost the fiscus R4 billion. The items included white bread, white flour and cake flour, sanitary products, nappies and school uniforms.
Another two items were considered – infant milk formula and frozen chicken parts – but not recommended for zero rating. However, the government chose to zero rate only three items.
Interested parties used the start of the new legislative cycle in November last year to submit proposals for possible consideration in the coming budget in February, this time under the auspices of the new Finance Minister, Tito Mboweni.
Concerns that were raised during the public hearings and in submissions to National Treasury during the 2018 legislative cycle, but were not addressed, had been raised in submissions in November. Interested parties were further given the opportunity to air their concerns and proposals during Treasury workshops in December.
Piet Nel, the head of the tax faculty and technical department of the South African Institute of Tax Professionals (Sait), said an issue that concerns Sait was the uncertainty about the effective date for the change in the donations tax rate.
In terms of the money bills that are now law, the proposed change to the rate of estate duty and donations tax on amounts above R30m from 20 percent to 25 percent is effective from March 1, 2018.
Nel explained that in the February Budget review, the Treasury indicated it would have regard to donations in the previous 12 months of a tax year, and if it exceeds R30m then the donations will attract donations tax at 25 percent.
However, in the final act it simply says the increase in the rate of tax is effective on March 1, 2018, without clarifying that it relates to donations made after that date.
Nel said the intention was probably that it would be effective from March 1, 2018 onwards, and not over the lifetime of a taxpayer. However, the current wording might cause interpretation issues.
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