Budget 2014SAIT’s commentary

OVERALL

• Congratulate the Minister on a rational budget

• Considering substantial challenges facing SA

• Expenditure ceiling welcomed

• Performance of the economy and economic growth are crucial to SA’s future success

OVERVIEW OF COMMENTS

SMALL BUSINESS RELIEF

• Streamling SBC, TT, VCC regime welcomed

• However:• SBC regime replacement – ?

await further details of rebates before commenting

• Turnover tax – sufficient to get informal sector in tax net? Relax entrance & compliance requirements, improve marketing & enforcement

• Turnover Tax - Reduce compliance costs, then why take away 4 mthly VAT submission?

SMALL BUSINESS RELIEF

• Grants tax exempt – welcomed, abuse to be monitored, s12P interaction?

• VCC changes – welcomed but perhaps more needs to be done

• CONCLUSION:• Good changes, but • Regular (yearly)

monitoring of effectiveness of incentives

SMALL BUSINESS RELIEF

• SEZ– • Bad news = C/Y & P/Y grant &

incentive allocations in DTI budget (R5.5m vs R5.4m) almost the same

• Good news = Next 2 years 12,8% p.a. increase

• Bad news = R550m decrease in incentives estimates (SEZ legislation still being finalized)

• No news = on 15% SEZ tax rate + 10 yr window period

• CONCLUSION:• No new incentives for SMMEs

(Enterprise Investment Pgm closed in Sept 2013 & no replacement announced)

SMALL BUSINESS RELIEF

• TRAVEL DEDUCTIONS– New tables to claim deduction for personal use result in punitive changes

• Car value = R160 000• Fixed cost reduction reduced

by 11%• Despite fuel & maintenance

costs increasing, increases not in line with actual costs

• Car value = R313 000• Fixed cost reduction reduced

by 7%• Fuel & maintenance costs

reduced by 7.5% and 23%..

SMALL BUSINESS RELIEF

• EMPLOYMENT TAX INCENTIVE

• Meaningful to SMMEs• Congratulations on success

of January take-up • Look forward to further

updates on its effectiveness

• OVERALL CONCLUSION• Need for a comprehensive

co-ordinated SMME Plan• Davis Committee Report

feedback guidance

FOREIGN DIRECT INVESTMENT

• CORPORATE TAX RATE• To be “gateway to Africa”

HQC regime not enough• Global trends suggest SA’s

corporate tax rate (28%) is high

• VAT rate (14%) is low

• CONCLUSION• Cut corporate tax rate;

Increase VAT rate• Formalise SA’s International

Tax Strategy• Create certainty (transfer

pricing) & stabilility

RESEARCH AND DEVELOPMENT

• LIMITED SUPPORT • NDP = innovation hub of

Sub-Sahara Africa….• But support by

government to private sector limited

• Section 11D deduction= declined by 65% from 2010/11 to 2011/12

• Not a healthy situation

RESEARCH AND DEVELOPMENT

• R&D as a % of GDP in South Africa

• Since R&D incentive introduced in 2006, R&D has steadily dropped

• Reasons:• Numerous changes in

legislation• Administration of regime• Concern: • Support Programme for

Industrial Innovation reduced from R200m to R50m – SMMEs affected!!

RESEARCH AND DEVELOPMENT

• SOLUTION:• DST to alleviate backlog on

approval process;• DST to promote

participation in incentive• National Treasury must

refrain from making more changes

• Certainty is needed!

SAVINGS & RETIREMENT REFORMS

• Commend:– Reinforcing need for

individual savings– Increase in retirement tax

free-lump sum

• Look forward to details of tax efficient savings vehicles

OTHER ISSUES

• Increase in rates needed:• Estate duty abatement• Donations tax exemption• Donations tax deduction

limitation percentage• Further clarification:• Social Security System• Gambling Tax• National Health Insurance• Carbon Tax• Taxation of trusts• Restrictions on IP under

exchange control regulations

• Tax Design Process• NT and SARS commended

on workshops held to date• Should be applied to all

legislation to prevent implementation with a ‘catch all phase’ and then a narrowing down.

WISH LIST:

• Reduce wasteful expenditure • Link government spending to

specific programs• Accountability for non-delivery• Prioritization of issues• Formalise clear and consistent

economic plans for:– Small businesses– Foreign Direct Investment– R&D– Savings