Muneer Hassan highlights changes to consumption tax in the 2015 budget: A summary of some of the tax-related budget proposals appears below.
FUEL TAXES
The general fuel levy will increase by 30,5 cents per litre and the Road Accident Fund levy by 50 cents per litre on 1 April 2015. The total increase in the fuel price is 80 cents per litre.
DIESEL REFUNDS
The diesel refund system allows for a refund of all or part of the fuel levies to producers in the agriculture, forestry, fishing and mining sectors. The administrative system in place since 2000 faces significant technical problems and legal challenges. Some eligible firms are unable to benefit from the system while others appear to be making disproportionate refund claims. To address these concerns, government proposes to delink diesel refunds from the VAT system from 1 April 2016. The National Treasury and SARS will explore alternative, more equitable rules and administrative procedures after consultation with the affected industries.
ELECTRICITY LEVIES
Given electricity supply constraints, additional measures are needed to manage demand. Government is considering an increase in the electricity levy from 3,5c/kWh to 5,5c/kWh. The additional revenue will be used to fund the broadening of the scope of the energy-efficiency savings tax incentive to include co-generation and an increase in the amount available for this incentive. Also under consideration is enhancing the accelerated depreciation for solar photovoltaic renewable energy. In the absence of a carbon tax, the electricity levy promotes energy efficiency and reduces greenhouse gas emissions. The 2c/kWh increase is a temporary measure to be withdrawn when the carbon tax is introduced in 2016.
ALCOHOLIC BEVERAGES AND TOBACCO PRODUCTS
Excise duties on alcoholic beverages will be increased by between 4,8% and 8,5% per cent and on tobacco products by between 5% and 7%.
RECOMMENDATIONS FOR SMALL-MEDIUM BUSINESSES
Turnover tax for micro businesses
The turnover tax regime was introduced to limit the compliance burden on micro businesses with an annual turnover of up to R1 million. These rules eliminate the need for a great deal of paperwork and compliance expenses. The Davis Tax Committee recommended that this incentive be made more generous to improve the participation of small businesses in the economy and the tax system. Government proposes to adjust the rates and thresholds to make the turnover tax more attractive.
CURBING TAX EVASION AND AVOIDANCE
Base erosion and profit shifting
Many countries face the problem of businesses exploiting gaps in international tax rules to artificially shift profits and avoid paying tax. These avoidance measures, practised widely by multinational firms, substantially reduce their contributions to national tax bases. In recent years, government has taken measures to limit artificial reductions of taxable income through cross-border interest payments.
Building on these steps, government will propose amendments to improve transfer-pricing documentation and reporting, and change the rules for controlled foreign companies and the digital economy. These proposals are in line with matters examined in a recent OECD report, ‘Addressing base erosion and profit shifting’, which examined the practice. A December 2014 report by the Davis Tax Committee on the same subject highlighted these concerns in the South African context. Tax returns will place a greater focus on indicators of potential base erosion and profit shifting.
CHANGES TO THE TAX RATES
Individuals
The budget proposed that the marginal personal income tax rates will be increased by one percentage point for all income tax brackets except the lowest, which will remain at 18%.
This also means a one percentage point increase in the tax rate for trusts.
To provide relief for inflation-related earnings increases (fiscal drag), all income tax brackets and rebates will be increased by 4,2%. The tax-free threshold for individual taxpayers below 65 years will increase from R70 700 to R73 650.
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Trusts
The tax rate on trusts (other than special trusts, which are taxed at rates applicable to individuals) increased from 40% to 41%.
Companies
No change is proposed to corporate tax rates.
Small business corporations
Financial years ending on any date between 1 April 2015 and 31 March 2016:
Micro businesses
Financial years ending on any date between 1 April 2015 and 31 March 2016:
Effective capital gains tax
(CGT) rates
Capital gains on the disposal of assets are included in taxable income.
Maximum effective rate of tax
Individuals and special trusts 13,65%
Companies 18,65%
Other trusts 27,31%
OTHER TAXES, DUTIES AND LEVIES
Value-added tax
VAT is levied at the standard rate of 14% on the supply of goods and services by registered vendors.
A vendor making taxable supplies of more than R1 million per annum must register for VAT.
A vendor making taxable supplies of more than R50 000 but not more than R1 million per annum may apply for voluntary registration.
Transfer duty
Transfer duty is payable at the following rates on transactions in respect of the acquisition of property on or after 1 March 2015 which are not subject to VAT.
Estate duty
Estate duty is levied at a flat rate of 20% on property of residents and South African property of non-residents. A basic deduction of R3,5 million is allowed in the determination of an estate’s liability for estate duty as well as deductions for liabilities, bequests to public benefit organisations and property accruing to surviving spouses.
Donations tax
- Donations tax is levied at a flat rate of 20% on the value of the property donated.
- The first R100 000 of property donated in each year by a natural person is exempt from donations tax.
- In the case of a taxpayer who is not a natural person, the exempt donations are limited to casual gifts not exceeding R10 000 per annum in total.
- Dispositions between spouses and South African group companies and donations to certain public benefit organisations are exempt from donations tax.
Securities transfer tax
The tax is imposed at a rate of 0,25 of a per cent on the transfer of listed or unlisted securities. Securities consist of shares in companies or members’ interests in close corporations.
Author:
Muneer Hassan CA(SA) is Senior Executive: Tax Legislation and Practitioners at SAICA
