Budget 2004 Professor Matthew Lester. BDO Member Firm Name Member Firm Name National Budgets 2000 - 2003

Budget 2004

Professor Matthew Lester

BDO Member Firm Name

Member Firm Name

National Budgets 2000 - 2003


Member Firm Name

Comments onNational Budgets 2004 at 16:00hrs

Back to sleep we go…

At least we don’t haveTo go to Amnesty/CGT

Lectures this year

What’s Matthew going To do this year?

JSE Unaffected

Great except for Sin Taxes


Member Firm Name

Review back to 22/2/2000

GAS 2/20001997

TaxReform

S9E

CGTAnnounced

RBTAnnounced

GetsTough

2/2001

TaxReform

GetsTougher

2/2002

TaxReform

GetsRough

2002/3Year of Consolidation

RBTImplemented

CGTImplemented

10/2001


Member Firm Name

2002

2/2002

TaxReform

GetsRough

2002/3Year of Consolidation

Refinement of CGT/RBT

SNIPERS

Enronitis and Behavior

2/2003

Taxation Laws Amendment Act

8/2002

Revenue Laws Amendment Act

12/2002

Tax Rate Changes2001 hangover

Major legislationRestructures

CGTRBT

DividendsOther


Member Firm Name

2003

2/2003

BUDGETOFFSHORE AMNESTYSURPRISE

TAX REFORM

SNIPERS

2/2004

Taxation Laws Amendment ActRates and Amnesty

5/2003

Revenue Laws Amendment Act

22/12/2003


Member Firm Name

2003 - Tips for Trevor

Drop maximum marginal rateTo 38 percent

Drop Corporate rateTo 28 percent

Drop VAT toTo 12 percent

Increase social spending..


Member Firm Name

Access to basic services: Refuse removal

Distribution of households by type of refuse removalOctober 1996 and 2001

0%

10%

20%

30%

40%

50%

60%

By local authority

Own refuse dump

No refuse disposal

Communual refuse dump

1996

2001


Member Firm Name

Access to basic services: Sanitation

Distribution of households by type of sanitationOctober 1996 and 2001

0%

10%

20%

30%

40%

50%

60%

Flush or chemicalPit latrine

Bucket latrine None

1996

2001


Member Firm Name

44 millionpeople

28 million<US$2 per day

5 millionUnemployed

5 millionState Pensions 6 million

HIV4 million

TaxpayersSo there is no

Room for mistakesAnd ….


Member Firm Name

And then violence appeared


Member Firm Name

And things are a bit uncertain

NASDAQ index since 2000

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500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

Feb00

May00

Aug00

Nov00

Feb01

May01

Aug01

Nov01

Feb02

May02

Aug02

Nov02

Feb03

Ind

ex

NASDAQ index


Member Firm Name

ALL DEALS ARE OFF

HOLDING BUDGET

NO CORPORATE TAXREDUCTION TO 28%

NO INDIVIDUAL TAXREDUCTION TO 38%

NO VAT TAXREDUCTION TO 12%


Member Firm Name

RSA Tax Collections

Fiscal year 2000 2001 2002 2003 2004R’000 R’000 R’000 R’000 R’000

Total tax collections 198,000 215,591 248,000 275,000 304,459

Comprising:• Corporate 30,265 39,667 56,921 69,300 81,150• Individuals 85,883 86,478 90,389 93,200 96,714• VAT 48,376 54,455 61,056 70,600 81,000• Fuel Levy 14,289 14,495 14,923 15,200 16,342• Transfer Duty 1,821 2,401 2,913 3,500 3,000• Skills Levy - 1,257 2,717 3,300 3,800• Sin Taxes 9,470 9,819 10,573 11,302 11,607• Import duty 6,778 8,226 8,680 9,805 11,000


Member Firm Name

Strong Rand

US$/Rand

3.0

4.05.0

6.07.0

8.0

9.010.0

11.012.0

13.0

Feb00

May00

Aug00

Nov00

Feb01

May01

Aug01

Nov01

Feb02

May02

Aug02

Nov02

Feb03

May03

Aug03

Nov03

Feb04


Member Firm Name

So who “dropped the bat and done a Donald”?

Budget ActualVarianceFiscal year 2000 2001 2002 2003 2004 2004 2004

R’000 R’000 R’000 R’000 R’000 R’000 R’000Total tax collections 198,000 215,591 248,000 275,000 304,459 300,300(4,159)

Comprising:• Corporate 30,265 39,667 56,921 69,300 81,150 73,790(7,360)• Individuals 85,883 86,478 90,389 93,200 96,714 98,2001,486• VAT 48,376 54,455 61,056 70,600 81,000 81,000-• Fuel Levy 14,289 14,495 14,923 15,200 16,342 16,3508• Transfer Duty 1,821 2,401 2,913 3,500 3,000 5,1002,100• Skills Levy - 1,257 2,717 3,300 3,800 4,000200• Sin Taxes 9,470 9,819 10,573 11,302 11,607 11,66558• Import duty 6,778 8,226 8,680 9,805 11,000 8,800(2,200)


Member Firm Name

So lets try again in 2004/5…

Actual Budget ExtraFiscal year 2000 2001 2002 2003 2004 2005 2005

R’000 R’000 R’000 R’000 R’000 R’000 R’000Total tax collections 198,000 215,591 248,000 275,000 300,300 326,956 26,656

Comprising:• Corporate 30,265 39,667 56,921 69,300 73,790 83,260 9,470• Individuals 85,883 86,478 90,389 93,200 98,200 105,938 7,738• VAT 48,376 54,455 61,056 70,600 81,000 89,500 8,500• Fuel Levy 14,289 14,495 14,923 15,200 16,350 17,409 1,059• Transfer Duty 1,821 2,401 2,913 3,500 5,100 6,870 1,770• Skills Levy - 1,257 2,717 3,300 4,000 4,300 300• Sin Taxes 9,470 9,819 10,573 11,302 11,665 13,111 1,446• Import duty 6,778 8,226 8,680 9,805 8,800 10,476 1,676


Member Firm Name

But there’s another important messageActual Budget Extra

Fiscal year 2000 2001 2002 2003 2004 2005 2005R’000 R’000 R’000 R’000 R’000 R’000 R’000

Total tax collections 198,000 215,591 248,000 275,000 300,300 326,956 26,656

Comprising:• Corporate 30,265 39,667 56,921 69,300 73,790 83,260 9,470• Individuals 85,883 86,478 90,389 93,200 98,200 105,938 7,738• VAT 48,376 54,455 61,056 70,600 81,000 89,500 8,500• Fuel Levy 14,289 14,495 14,923 15,200 16,350 17,409 1,059• Transfer Duty 1,821 2,401 2,913 3,500 5,100 6,870 1,770• Skills Levy - 1,257 2,717 3,300 4,000 4,300 300• Sin Taxes 9,470 9,819 10,573 11,302 11,665 13,111 1,446• Import duty 6,778 8,226 8,680 9,805 8,800 10,476 1,676


Member Firm Name

Individual Taxpayer stocktake

4 million identified

Less 3,5 million below R140 Kpa

Leaves 0,5 million below R140 Kpa

Drop 250 KEmployees Tax

Audit the Rest


Member Firm Name

Individuals Tax Collections

Fiscal year 2000 2001 2002 2003 2004 2005R’000 R’000 R’000 R’000 R’000 R’000

Total tax collections 85,883 86,478 90,389 93,200 96,714 106,938Retirement Fund tax 5,098 5,219 5,098 6,900 5,950 6,000

True Individuals Tax 90,981 91.697 95,487 100,100 102,664 112,938

Base Index at 31 August 94.7 101.2 105.9 118.2 122.9 130.0

2000 Inflation adjusted collection 118,074 124,922


Member Firm Name

2001 Tax Tables

Annual Income Bracket Basic Marginal• 0 - 35 000 - 18%• 35 000 - 45 000 R 6 300 26%• 45 000 - 60 000 R 8 900 32%• 60 000 - 70 000 R 13 700 37%• 70 000 - 200 000 R 17 400 40%• 200 000 - R 69 400 42%Primary rebate - R 3 800Over 65 rebate – R 2 900


Member Firm Name

2002 Tax Tables

Annual Income Bracket BasicMarginal• 0 - 38 000 - 18%• 38 001 - 55 000 R 6 840 26%• 55 001 - 80 000 R 11 260 32%• 80 001 - 100 000 R 19 260 37%• 100 001 - 215 000R 26 660 40%• 215 001 - R 72 660 42%Primary rebate - R 4 140Over 65 rebate - R 3 800Threshold - under 65 - R 23 000

over 65 - R 39 154


Member Firm Name

2003 Tax Tables

Annual Income Bracket Basic Marginal• 0 - 40 000 - 18%• 40 000 - 80 000 R 7 200 25%• 80 000 - 110 000 R 17 200 30%• 110 000 - 170 000 R 26 200 35%• 170 000 - 240 000 R 47 200 38%• 240 000 - R 73 800 40%Primary rebate - R 4 860Over 65 rebate - R 3 000Threshold - under 65 - R 27 000

over 65 - R 43 667


Member Firm Name

2004 Tax Tables

Annual Income Bracket Basic Marginal• 0 - 70,000 - 18%• 70,000 - 110,000 R 12,600 25%• 110,000 - 140,000 R 22,600 30%• 140,000 - 180,000 R 31,600 35%• 180,000 - 255,000 R 45,600 38%• 255,000 - R 74,100 40%Primary rebate - R 5,400Over 65 rebate - R 3,100Threshold - under 65 - R 30,000

over 65 - R 47,222


Member Firm Name

2005 Tax Tables


over 65 - R 50 000

If you want to live here you are going to get mugged…

3,5 Million taxpayers live here


Member Firm Name

A 20 Year storyR1 Million pa today

Year 1985

Index 20.8

Taxable income 161,013

Tax per tables 73,715Surcharge 5,117Rebates (620)

Net tax 78,211

Average tax rate 48.6%

1990

42.4

328,222

137,857-

(1,800)

136,057

41.5%

1994

66.6

515,553

214,67815,503(1,950)

228,230

44.3%

2003 2004

122.1 129.2

945,180 1,000,000

350,172 370,070- -

(5,400) (5,800)

344,772 364,270

36.5% 36.4%


Member Firm Name

A 20 Year storyR300 000 pa today

Year 1985

Index 20.8


Tax per tables 17,360Surcharge 1,172Rebates (620)

Net tax 17,912


1990

42.4

98,466

36,785-

(1,800)

34,965

35.5%

1994

66.6

232,231

59,4963,485

(1,950)

61,032

39.5%

2003 2004

122.1 129.2

283,554 300,000

85,522 90,070- -

(5,400) (5,800)

80,122 84,270

36.5% 36.4%


Member Firm Name


Year 1985

Index 20.8


Tax per tables 3,010Surcharge 167Rebates (620)

Net tax 2,558


1990

42.4

32,822

8,481-

(1,800)

6,681

20.3%

1994

66.6

51,555

15,20352

(1,950)

12,755

24.7%

2003 2004

122.1 129.2

94,518 100,000

18,729 19,820- -

(5,400) (5,800)

13,329 14,020

14.1% 14.0%


Member Firm Name


Year 1985

Index 20.8


Tax per tables 1,288Surcharge 47Rebates (620)

Net tax 715


1990

42.4

16,411

3,231-

(1,120)

2,111

12.9%

1994

66.6

25,778

5,668-

(1,520)

4,148

16.1%

2003 2004

122.1 129.2

47,259 50,000

8,507 9,000- -

(5,400) (5,800)

3,107 3,200

6.6% 6.4%


Member Firm Name

Corporate & STC

2005 2004 2003• Tax rate 30% 30% 30%• Small corporations 15% 15%15%

Threshold R150K R150K R100K

MANUFACTURING ALLOWANCE 100% on SBC’s


Member Firm Name

Future Tax Rates Combined

Effective Rates of Tax CorporateCorporate Trust Trust individual individualCapital Revenue Capital Revenue Capital Revenue

Income 100 100 100 100 100 100Inclusion Rate (percentage) 50 100 50 100 50 100

=============================================================Taxable Incone 50 100 50 100 25 100Tax Rate (percentage) 30 30 40 40 40 40

=============================================================Income Tax 15 30 20 40 10 40STC at Fraction 12.5/112.5 9 8

=============================================================Total Tax 24 38 20 40 10 40


Member Firm Name

Scenes from Forthcoming attractions (Individuals)

• Travel allowance rehash

• Private use

• High value vehicles

• Ad valorem structure review

• Effective 2005


Member Firm Name

Scenes from Forthcoming attractions (Individuals)

• Equity Participation

• Broad based employee participation tax-free but capped.

• Equity based incentives for highly paid employees to be overhauled

• SEE IT ALL IN REVENUE LAWS AMENDMENT ACT IN LATE 2003.


Member Firm Name

Scenes from Forthcoming attractions (Individuals and Companies)

• Under the Spotlight

• Convertible instruments

• Debt schemes never repayable

• Share redemptions

• Domestic Foreign Hybrids

• Watch out for section 76A activation later in 2003


Member Firm Name

Tax Administration and compliance

• Under the Spotlight (but don’t expect to know more before October 2003)• Extension of information mining• Reporting of change of address• Tax season campaigns• Advanced rulings• Regulation of tax practioners• Witholding Tax on Foreigners• Taxation of Trusts• Property holding companies

• ALL THIS MEANS MORE AND MORE DISCLOSURE AND MORE EXPOSURE TO PENALTIES AND INTEREST CHARGES


Member Firm Name

Tax Administration and compliance

• Under the Spotlight ( but don’t expect to know more before October 2003)• One stop service center• Single business numbers• Advanced rulings• E Stamping• VAT retail system• Task team for small business


Member Firm Name

Major Reviews and Initiatives still outstanding


Member Firm Name

Incentives to save

• Interest deduction 2004 (under 65 – R10 000)• Interest deduction 2005 (under 65 – R11 000)• Interest deduction 2004 (over 65 – R16 000)• Interest deduction 2005 (over 65 – R16 000)


Member Firm Name

2005 Tax Tables


over 65 - R 50 000

Huge Incentive to Invest in a Retirement Annuity

No Incentive to save in aRetirement Annuity


Member Firm Name

Retirement Funds Tax

2005 2004 2003• Tax rate 18% 18% 25%

RFT is still taking more than R6 Billion a year from the pensioner


Member Firm Name

But its not all bad news


Member Firm Name

Start with some basics…

2000 2001 2002 2003 2004RebatesPrimary 3,710 3,800 4,140 4,860 5,400Age Rebate 2,775 2,900 3,000 3,000 3,000Tax ThresholdsUnder 65 19,526 21,111 23,000 27,000 30,000Over 65 33,717 36,538 39,154 42,640 47,222

Interest Free ThresholdsUnder 65 2,000 2,000 3,000 6,000 10,000Over 65 3,000 3,000 4,000 10,000 15,000So Thresholds including interest are actually

Under 65 21,526 23,111 26,000 33,000 40,000Over 65 36,717 39,538 43,154 52,640 62,222

2005

5,8003,200

32,22250,000

11,00016,000

43,22266,000


Member Firm Name

It’s very simple and it goes like this….

Step 1 Widen the tax

bracketsOver 5 years

Step 2 Increase tax free

interestFor the over 65!

Step 3

Determine tax threshold for the over 65 !

Step 4 Then Double it !


Member Firm Name

There are two of us you know!


Member Firm Name

TAX THRESHOLD OVER 65

GIVES TAX FREE R66 000

Times 2 pensioners R132 000

TAX FREE


Member Firm Name

TAX THRESHOLD OVER 65

Gross Income = R 171 000

Less: Tax free interest R 16 000

Taxable income R 155 000

Taxation R 35 570

Less Rebates R 9 000

Taxation R 24 570

Average rate 14,3 percent


Member Firm Name

RetirementSavings

RetirementFunds

Lump sum Annuities Home Investments Cash

Dad’sAnnuities

R 155 000

Mom’sAnnuities

R 155 000

Dad’sInterest

R 16 000

Mom’sInterest R 16 000

Dads lump sum (pension)

Mom’s lump sum (RA’s)

Medical FundLiving Annuity

OffshoreInvestmentsUnit trustsLife Policies


Member Firm Name

Incentives to saveSome suggestions

• We have to get an tax incentive for all South Africans to save.

• Ditch RFT, (but that’s going to take some doing.

• Stuff the second schedule. R120 000 once in a lifetime is not going to help anyone.

• Keep going on the tax relief for pensioners on interest and annuity income.


Member Firm Name

Transfer Duty

Transfer Duty- 2001Was1% on R70 0005% on 70 001 to 250 000

8% on 250 000 plus Transfer Duty- 2002Now0% on R100 0005% on 100 001 to 300 000

8% on 300 000 plus

Transfer Duty- 2003Now0% on R140 0005% on 140 001 to 300 000

8% on 300 000 plus

Transfer Duty

Fiscal Year 2000 2001 2002 2003 2004 2004R000's R000's R000's R000's R000's R000's

Transfer Duty Collections 1821 2401 2913 3500 4250 5,300

House Prices vs CPI

150,000200,000

250,000300,000

350,000400,000

450,000

Jan00

Apr00

Jul00

Oct00

Jan01

Apr01

Jul01

Oct01

Jan02

Apr02

Jul02

Oct02

Jan03

Apr03

Jul03

Oct03

Ind

ex

House Prices CPI

Transfer Duty- 2004Now0% on R150 0005% on 150 001 to 320 000

8% on 320 001 plus


Member Firm Name

Scenes from Forthcoming attractions (Transfer Duty)

• Transfer Duty

• Revenue Laws Amendment Act 2003

• Revenue Laws Amendment Act 2004

• Disclosure and Administration

• Inspections and prosecutions


Member Firm Name

Stamp Duty

• Stamp Duty on Mortgage Bonds withdrawn

• Stamp duties on fixed deposits and non- convertible debentures withdrawn.

• Stamp Duty on long-term lease arrangements to be increased.


Member Firm Name

Sin Tax

• Cigarettes 16.55 % = R4.53 per pack of 20 (VAT ex) Total = 52 % Tax.

• Cigars = 15.67%

• Pipe Tobacco = 17,3

• Dope = 0%

• Spirits = 13,5% / R1,70 per liter

• Beer = 9% /4 cents per can

Sin Taxes


Sin Tax Collections 9,470 9,819 10,573 11,302 11,607 13111


2000 Inflation Adjusted collection 12,290 13,003


Member Firm Name

Fuel Levy 93 Octane

2005 2004 2003• Total Tax per Liter R1,415 R126.5 R120.5• %age of pump price 37.4% 35.0% 28.8%

Fuel Levy


Fuel Levy Collections 14289 14495 14923 15200 16342 17409


2000 Inflation Adjusted collection 18,544 19,620


Member Firm Name

Things to do in 2004

• OFFSHORE AMNESTY• Deadline 29/2/2004

• Applications• Tax returns and payments• VAT and employees tax• Approvals and fines• Cleanup old structures

• CFC’s• Offshore trusts• Offshore Investments• Offshore administration v local administration


Member Firm Name

Why I am staying in the new RSA

Base2001

State Expenditure Rmil

General Government 17,219

Protection services 40,651Defence 15,564Police 16,291Prisons 5,788J ustice 3,008

Social services 116,567Education 50,975Health 28,579Social security 29,547Housing 6,174Community development 1,292

Economic services 22,743Water 3,338Fuel and Energy 249Agriculture 4,514Mining 1,354Transport 8,752Other 4,536

Interest 46,320==========

243,500==========

Total Tax Collections 198,000==========

Deficit 45,500==========

CPI 2003/4 2003/4 2004/5Adjusted Budget actual Variance Budget

Rmil Rmil Rmil Rmil Rmil

21,733 23,483 1,750 23987

58,474 58,327 (147) 63,24522,481 22,367 (114) 2308922,806 23,127 321 256698,076 7,898 (178) 88335,111 4,935 (176) 5654

173,493 177,330 3,837 196,68569,062 69,826 764 7586339,077 39,676 599 4258648,652 51,486 2,834 599356,547 5,651 (896) 6339

10,155 10,691 536 11962

43,646 44,999 1,353 49,4116,028 5,834 (194) 61491,695 2,264 569 24626,709 6,635 (74) 71091,821 1,506 (315) 2053

15,537 16,284 747 1732811,856 12,476 620 14310

50,986 47,326 (3,660) 50432========================================

348,332 351,465 3,133 383,760========================================

304,459 298,905 (5,554) 330864========================================

43,873 52,560 8,687 52,896========================================

Budgeted deficit 2000 45,500Inflation adjusted to 2004 55,169

==========Actual deficit 2004 52,896

==========Still to the good 2,273

==========


Member Firm Name

Why I am staying in the new RSA

Base2001

State Expenditure Rmil

General Government 17,219

Protection services 40,651Defence 15,564Police 16,291Prisons 5,788J ustice 3,008

Social services 116,567Education 50,975Health 28,579Social security 29,547Housing 6,174Community development 1,292

Economic services 22,743Water 3,338Fuel and Energy 249Agriculture 4,514Mining 1,354Transport 8,752Other 4,536

Interest 46,320==========

243,500==========

Total Tax Collections 198,000==========

Deficit 45,500==========

2003/4 2003/4 2004/5Budget actual VarianceRmil Rmil Rmil

23,483 1,750

58,327 (147)22,367 (114)23,127 3217,898 (178)4,935 (176)

177,330 3,83769,826 76439,676 59951,486 2,8345,651 (896)

10,691 536

44,999 1,3535,834 (194)2,264 5696,635 (74)1,506 (315)

16,284 74712,476 620

47,326 (3,660)====================

351,465 3,133====================

298,905 (5,554)====================

52,560 8,687====================

2004/5 %ageVariance Budget increase

Rmil Rmil

23987 2

63,245 823089 325669 118833 125654 15

196,685 1175863 942586 759935 166339 12

11962 12

49,411 106149 52462 97109 72053 36

17328 614310 15

50432 7====================

383,760 9====================

330864 11====================

52,896 1====================


Member Firm Name

The woods are lovely, dark and deepBut I have promises to keep,And miles too go before I sleep,And miles to go before I sleep…

Robert Frost

Documents

Budget 2004 Professor Matthew Lester. BDO Member Firm Name Member Firm Name National Budgets 2000 - 2003