Taxing the future

Stanley Broun, Tax and Fiduciary consultant, Sanlam Private Wealth.

Although Finance Minister Nhlanhla Nene played it very close to his chest regarding the specifics of tax reforms we can expect in the February 2016 Budget, we’ve compiled a snapshot of the possible tax reforms announced in his 2015 Medium Term Budget Policy Statement.

Corporate income tax

There are great concerns about cross-border base erosion and profit shifting (BEPS), in particular, the misuse of transfer pricing. This is a hot topic globally and here in South Africa and it’s definitely getting the required attention. Initiatives are under way to comprehensively deal with leakages in corporate income tax.

Value Added Tax

VAT is the second largest source of tax revenue, sponsoring resources that fund progressive public expenditure programmes in education, health and social protection. Notwithstanding that a VAT increase is not politically favourable, Minister Nene’s comments could pave the way to a possible increase in the VAT rate in the short to medium term. No decision has been made yet, but it is one available option to finance key elements of the National Development Plan.

Wealth taxes

Clearly, wealth taxes are still on the cards and the Minister requested further advice on this burning issue.

Carbon taxes

The National Treasury will publish a draft Carbon Tax Bill for public comment. It will provide further opportunity for debate on the detailed design and impact of the proposed tax.

General

Reforms related to mining taxation, small-business taxation and estate duty are under consideration for the medium term.

South Africa has already committed to international agreements on automatic exchange of financial information for tax purposes. The first exchange in terms of these initiatives took place last month. More than 90 countries have committed to exchange information by 2018 and South Africa is one of the first adopters among them. Minister Nene categorically stated that tax evaders and aggressive tax planners would have nowhere to hide.