Deneys Reitz - Budget 2007/ 2008

INTRODUCTION

The broad objectives of the 2007 tax proposals are :

* supporting economic growth, investment and job creation, business development and confidence;

* promoting financial security of households and reducing their vulnerability through retirement reforms that encourage savings;

* supporting macro-economic policy objectives.

Main Tax Proposals

The main proposals include

* replacing STC with a dividend tax reducing the rate from 12,5% to 10% and broadening the base;

* personal income tax relief for individuals amounting to R8,4 billion;

*  abolishing the retirement fund tax;

*  treating the sale of shares held for more than three years as capital gains.

* increasing the tax free interest and dividend income monetary thresholds;

* streamlining tax and regulatory aspects of retirement funds;

* protecting South Africas intellectual property rights tax base;

* increasing excise duties on tobacco products and alcoholic beverages;

* increasing the general fuel levy and the Road Accident Fund levy.
CORPORATE TAX PROPOSALS STC and taxation of dividends Secondary tax on companies is to be phased out and replaced with a lower dividend tax at shareholder level. The reform will happen in two phases:-

* Phase One - STC will be replaced with a dividend tax at company level and the rate will be reduced from the current 12.5% to 10%. In addition, the dividend tax shall apply to all distributions regardless of profits. This phase will be effective from 1
October 2007, except for certain anti-avoidance provisions taking effect from 21 February 2007.

* Phase Two - will commence in 2008 and will entail the conversion of STC to a dividend tax on shareholders, with administrative enforcement through a withholding tax at company level. The implementation of this phase will depend on the renegotiation of several international tax treaties. There is no mention of the
introduction of an imputation system to provide credit for taxes imposed on the profits out of which the dividends are declared.
Depreciation

* New rail locomotives and wagons: 20% per annum

* New quay walls and other port facilities: 5% per annum

* New commercial buildings and upgrades: 5% per annum

* Environmental capital expenses: will qualify for allowances.

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