Islamic finance
Last year’s Budget announced that the taxation of Islamic financial products would be aligned with conventional financial instruments. Provisions were introduced to cover several instruments. This year the rules will include ijara products, which act like commercial finance leases. Amendments to legislation will facilitate the issue of Islamic-compliant government bonds.
Learnership tax incentive
The learnership tax incentive, which is designed to support youth employment, will expire in September 2011. The tax expenditure associated with this incentive is estimated to have amounted to R324 million in 2007/08, but its effectiveness is difficult to assess. Government proposes to extend the incentive for five years, subject to an analysis of its effectiveness by businesses, sector and training authorities, and the Department of Higher Education and Training. The review will take place during 2011.
National Health Insurance
Government expects that the National Health Insurance (NHI) will be phased in over 14 years. While initial allocations have been made in the 2011 Budget, the NHI system will require funding over and above the current revenues allocated to public health.
Preliminary analysis indicates that the phasing in of a payroll tax (payable by employers), an increase in the VAT rate and a surcharge on individuals’ taxable income could be considered as funding options. The feasibility and practicality of co-payments or user charges will also be explored. Announcements about specific funding instruments will be made in the 2012 Budget.
Research and development tax incentive
The research and development tax incentive is intended to encourage innovation and job creation. Government proposes to streamline the current incentive, introducing an approval process by the Department of Science and Technology before a taxpayer can claim this incentive. This should limit opportunities for retrospective reclassification of spending.
Dividends tax
The dividends tax will come into effect on 1 April 2012, replacing the secondary tax on companies. The introduction of the tax should correct the impression that a tax on dividends is another tax on businesses. Legally and economically, it will be a tax on individuals and non-resident shareholders.
Transfer duty
Government proposes to increase the transfer duty exemption threshold from R500 000 to R600 000. A rate of 3% will be applicable to the value from R600 001 to R1 000 000; an amount of R12 000 plus 5% to the value between R1.0 and R1.5 million; and an amount of R37 000 plus 8% to amounts above R1.5 million.
This revised rate structure will apply to properties acquired under purchase agreements concluded on or after 23 February 2011. It will also be applicable to legal persons (close corporations, companies and trusts).
Industrial development zones
To support the objectives of the industrial policy action plan and the New Growth Path, businesses making Greenfield and/or Brownfield investments qualify for tax relief. Greenfield investments in industrial development zones (IDZs) qualify for additional relief. Government will consider expanding incentives for labour-intensive projects in IDZs.
Electricity levy
Government proposes to increase the levy applied to electricity generated from non-renewable and nuclear energy sources by 0.5c/kWh to 2.5c/kWh from 1 April 2011. Some of this revenue will be set aside to fund the rehabilitation of roads damaged as a result of the haulage of coal for electricity generation. The increase should have no impact on electricity tariffs, as it has already been taken into account in the National Energy Regulator tariff structure.
Fuel taxes
Government proposes to increase the general fuel levy by 10c/l on both petrol and diesel, effective from 6 April 2011.
Savings
Interest income is not taxed up to a certain threshold. As from 1 March 2011, government will increase the tax-free interest income annual threshold from R22 300 to R22 800 for individuals below 65 years, and from R32 000 to R33 000 for individuals 65 years and over. The foreign interest income threshold will remain at R3 700.
Several countries use tax incentives to encourage people to save towards specific goals such as education, healthcare, housing or retirement, or to promote general savings. Government will explore two incentivised savings schemes – one for housing (deposit for first-time homeowners) and another for higher education – as alternatives to tax-free interest income thresholds.
The possibility of a more consistent tax treatment of all forms of income from capital, such as interest, dividends and capital gains, will also be considered.
Customs
SARS has launched its Customs Modernisation Programme. Customs codes aligned with procedures prescribed in the Kyoto Convention have been introduced, and during 2011 automated inspection services and electronic acquittals will be implemented. Later this year, two bills will be introduced to Parliament to provide an internationally aligned legal framework that will support customs modernisation.
Voluntary disclosure programme
To encourage taxpayers to come forward to regularise their tax affairs without the imposition of additional tax, penalties and/or interest, the voluntary disclosure programme that began in November 2010 will remain open until 31 October 2011. More than 1 200 applicants have already come forward under the programme.
Gambling
Government proposes that with effect from 1 April 2012, all gambling winnings above R25 000, including those from the National Lottery, be subject to a final 15% withholding tax. Similar gambling taxes exist in India, the Netherlands and the United States.
SARS - Audit
SARS plans to make greater use of the data provided by credit bureaus to build detailed taxpayer profiles and identify non-compliance. SARS is also extending its cooperation with other tax administrations in the areas of information exchange, skills transfer and audit.
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