Download taxes - Efficient Group

Authorised Financial Services Provider – FSP No: 859
2009 Pre-Budget Presentation:
“It’s Just a
Jump to the Left”
Presented by:
Dawie Roodt
4 February 2009
“It’s Just a Jump to the Left”
1. How your Tax Money is being spent?
2. Can the State afford the ANC Manifesto’s
bill?
Basic Economic System
Production
= 100
Consumption
= 100
Economic Growth
Year 1:
Production
= 100
Investment
= 20
Consumption
= 80
Year 2:
Eco. Growth = 5.0%
Production
= 105
Investment
+2
+3
= 22
Consumption
= 83
Economic Growth
Things Certain in Life:
Death & TAXES
Year 1:
Production
-5
= 100
Investment =
Taxes
15
= 30
Consumption
- 25
= 55
Scenario 1:
All Taxes are Invested
Production
= 100
+ 30
Investment =15 = 45
Taxes = 30
Consumption
= 55
Year 2:
Eco. Growth = 10.0%
Production
= 110
+3
Investment
=18
Taxes
= 30
Consumption
+7
= 62
Economic Growth
Scenario 1
Scenario 2:
All Taxes go to Expenditure
Production
= 100
+ 10
Investment =15 = 25
Taxes
+ 30
+ 20
= 30
Consumption
= 55
= 75
Year 2:
Eco. Growth = 7.0%
Production
+2
= 107
Investment
Taxes
=17
= 30
Consumption
+5
= 60
Economic Growth
Scenario 1
Scenario 2
Scenario 3: Efficiency Loss
Production
= 100
+7
=15 = 22
Taxes = 30
Investment
+ 25
30
Consumption
+ 18
= 55
= 73
Year 2:
Eco. Growth = 6.0%
Production
+2
= 106.0
Investment = 17
.
Taxes
+4
= 30
Consumption
= 59
Economic Growth
Scenario 1
Scenario 2
Scenario 3
Year 2:
Eco. Growth = 6.0%
Investment= 17
Production
•=Consumption
> Production
106.0
Taxes = 30
• CA Deficit
• Currency Volatility
Consumption
= 59
• Pressure on Prices, i.e. Inflation
Want
• Upward Pressure on Interest Rates
!!!
=106
80
as before !!
=127
Adverse Impacts…
2008
2009
-7.5%
-5.1%
11.6%
4.5%
15.0%
11.5%
R9.52
R9.00
-0.3% (Q3)
0.1%
3.0%
0.5%
CA Balance:GDP
Consumption >
Production
Inflation
(CPI, average)
Interest Rate
(Prime, end of yr)
Rand
(end of yr)
HH savings
Economic
Growth (full year)
Undermining the Economy
EXTERNALLY
INTERNALLY
The State
Takes from Savers –
Gives to Spenders
In Reality…..
Source: SARB, Efficient Research 2008
But in Reality…
2007
GDP
GDP Growth (real)
R2 000bn
5.1%
Total State Revenue
R537bn
Total Company Income Tax
R137bn
Total Investment
R422bn
What if Company Tax
Scrapped?
2007
GDP
R 2020
2000bn
bn
GDP Growth (real)
5.1% + 0.9%
5.1%
= 6.0%
Total State Revenue (excl
CIT)
6 yrs
Total Company Income Tax
Total Investment
R537bn – R137bn
R537bn
= R400bn
R0bn
R422bn + 0.63*R137bn
= R422bn + R87.5bn
= R509.5bn
Therefore, Needed
1. Higher Savings:
– Lower Corporate Taxes
– Lower Personal Income Taxes
2. Less Social Expenditure:
– 12m+ Grants Recipients
– Education Results ??
3. Focus on State Efficiency
4. More Focus on Capital Expenditure/
Productive Capacity
Treasury’s
Playground:
2008/09
Comparing Apples with Apples…
2008/09 (Budget)
SA Reserve Bank
National Treasury
National Government Finance
Main Budget
Revenue
625,4
Revenue
625,4
Expenditure
611,1 0.6% of
Expenditure
611,1
Balance
14,3 GDP
Balance
14,3
+ Social Security
+ Social Security
Revenue
24,7
Expenditure
20,5
= Consolidated Central Government = Consolidated National Budget
18,5
0.8% of Balance
GDP
+ provincial
+ local government
= Consolidated General Government
+ public enterprises
= Non-financial public sector?
Three Spheres for Revenue
• Provincial
Provincial
(1.0%)
Local
government
(municipal)
(3.6%)
National
(95.6%)
–
–
–
–
Motor vehicle licenses
Casino (gambling) taxes
Liquor licenses
Fuel levy?
• Local
– Property rates
– RSC levies (prior to 06/07)
• National
– PIT, CIT, VAT, Fuel levy
Source: 2008 Tax Statistics,
National Treasury and SARS
Revenue
Revenue
Revenue Categories
Strong Demand
Economic Activity,
Commodity Cycle
Wage Increases,
Inflation… 12.0%
National Tax Revenues
Revenue Sources (Est. 2008/09)
28%
25%
3%
4%
31%
9%
Individual Tax
Companies (incl STC)
VAT
Excise Duties
Fuel Levy
Other
Registered Income Tax Payers
Registered
Taxpayers
Individuals
Companies
Trusts
PAYE
2004/05
4.1m
930k
320k
300k
2005/06
4.5m
1.1m
345k
330k
2006/07
45% Total PIT 75% Total CIT
4.8mpaid by 1.2m
375k companies
350k
top paid
5.0%by 1.2%
2007/08
5.2m
(9.3% y/y)
1.6m
(30.0% y/y)
385k
(2.8% y/y)
380k
(8.8% y/y)
Source: National Treasury & SARS, 2008, business Day 3 Feb 08
2008/09 in Review:
Revenue
Budget ’08
MTBPS ’08
Efficient
Estimate
Diff. (%)
Income Tax
369.7
380.7
383.8
14.0 (3.8%)
Individual
191.1
201.0
196.8
5.8 (3.0%)
Company
156.5
158.9
163.8
7.3 (4.7%)
STC
20.0
18.2
19.7
-0.3 (-1.5%)
Other
2.2
2.6
2.2
-0.1 (0.0%)
VAT
167.0
167.0
154.2
-12.9 (-7.7%)
Fuel Levy
26.4
25.5
25.0
-1.4 (-5.3%)
C&E&Other
91.2
80.4
81.7
-9.5 (-10.4%)
SACU
-28.9
-27.1
-27.5
-1.4 (-4.8%)
Total
625.4
626.5
617.2
-8.1 (-1.3%)
Reasons for Under Shooting
• Individual tax
 High wage and salary negotiations (wage inflation)
• Company tax
 Commodity prices (“Two halves” of 2008 – commodity
boom/bust)
• STC
 Retained income
• VAT
 Consumption expenditure plummets
Total Budget Revenue
Tax
revenue
• 98.0%
Non-tax
revenue
• 2.0%*
• Interest
• Dividends
Less:
SACU
payments
Total
budget
revenue
• Botswana, Lesotho,
Namibia, Swaziland (BLNS)
• Rent on land
• Similar excise and customs
(import) duties
• Sales of good and
services
•Revenues pooled and
distributed based on formula
• Fines and penalties
Source: 2008 Tax Statistics,
National Treasury and SARS
SA Contributions to and
received from SACU Pool
Rbn
50
40
30
20
10
0
-10
-20
-30
Contribution to and received from SACU pool
2000
2001
2002
2003
2004
Contribution to (include some BLNS collections)
2005
2006
2007
Receive from
Loss
2008
Source: 2008 Tax Statistics,
National Treasury and SARS
SACU Revenue Share Formula
1. Customs component
– Country’s share of intra-SACU trade, including reexports
2. Excise component
– Based on GDP, net of development component
3. Development component
– Set at 15% of total excise pool
– GDP p.c. vs average SACU GDP p.c.
– GDP < SACU average: compensated
Source: 2008 Tax Statistics,
National Treasury and SARS
SACU Economic Indicators
Botswana
Lesotho
Namibia
South
Africa
Swaziland
GDP per capita
R51.4k
R6.3k
R26.4k
R41.1k
R18.6k
To SACU pool (07/08)
R0.2bn
R0.1bn
R0.4bn
R45.4bn
R0.1bn
From SACU pool (07/08)
R9.0bn
R4.1bn
R6.6bn
R21.5bn
R4.9bn
Win or loose
R8.8bn
R4.0bn
R6.2bn
R23.9bn
R4.8bn
Out:In Ratio
45x
41x
16x
0.5x
49x
SACU receipt : GDP
10.3%
36.3%
12.5%
1.1%
23.9%
SACU : state revenue
34.8%
91.2%
50.4%
4.5%
88.5%
*Calculated using average R/$7.05
Source: 2008 Tax Statistics, IMF, own calculations
Expenditure
“Budget priorities for the period ahead are
focused on social solidarity and building a
more equitable society”
(Source: 2008 MTBPS)
Expenditure
Rein in Expenditure
Lower foreign debt
Spending Priorities
Expenditure: Functional Classification (2008/09 Est.)
8% 1%
16%
16%
54%
19%
15%
6%
General Gov
State Debt Cost
Social Dev.
8%
11%
Protection Serv.
Other
Housing, Com Dev.
Eco. & Infra.
Education
Health
Social Expenditure
Source: Various budgets, own calculations
2008/09 in Review:
Expenditure
Budget ’08
MTBPS ’08
Efficient
Estimate
Diff. (%)
Voted Amounts
345.3
370.2
366.4
21.1 (6.1%)
Central Gov.*
48.4
51.6
48.9
0.5 (1.0%)
Fin. & Admin.
23.6
33.8
31.1
7.5 (31.8%)
Social Services
117.3
121.0
118.1
0.8 (0.7%)
Justice & Protect.
88.7
90.3
93.2
4.4 (5.1%)
Eco. & Infrastruc.
67.2
73.5
75.0
7.8 (11.6%)
State Debt Cost
51.2
54.0
52.7
1.5 (2.9%)
Transfer Provinces
199.4
204.0
205.2
5.7 (2.9%)
Other
15.2
7.3
14.1
-1.1 (-3.9%)
Total
611.1
635.5
638.8
27.7 (4.5%)
R bn
* Includes: Provincial and local government
Balance/Debt
Revenue and Expenditure
Fiscal Balance
Budget balance adjusted for cash flows, to GDP
1
0
-1
-2
-3
-4
-5
1996
1998
2000
2002
2004
2006
2008
2010
Source: SARB
Forecast: Efficient Group
State Debt
Total national State Debt, to GDP
50
Domestic debt: R485.5bn
40
Foreign debt: R81.9bn
30
20
10
1996
1998
2000
2002
2004
2006
2008
2010
Source: SARB
Forecast: MTBPS, Efficient
The Grey Area
- Applying Monetary Policy the Fiscal Way!
‘Loss’ paid by State to
SARB:
Interest received = 3%
Interest Paid = 8%
Liquidity
drainage
“Cost” = R3bn
Source: SARB, Treasury
Summary 2008/09
Budget ’08
MTBPS ’08
Efficient
Estimate
Difference
(Eff – Budget)
Revenue
625.4
626.5
617.2
-8.1
Expenditure
611.1
635.5
638.8
27.7
(Deficit)/Surplus
14.3
-8.9
-21.6
35.9
+0.6%
-0.4%
-0.9%
% of GDP
Budget 2009/10
Reality Check!
Summary 2009/10
Budget ’08
MTBPS ’08
Efficient
Estimate
Revenue
692.9
682.9
667.2
Expenditure
681.3
735.0
749.6
11.6
-52.1
-82.4
+0.5%
-2.0%
-3.4%
(Deficit)/Surplus
% of GDP
Expenditure
Trev’s Plans…
(MTBPS)
“Achieving Social Solidarity and
Equitable society”
Budget Priorities
•
•
•
Education
– Broaden employment
opportunities
– Raise productivity
Health
– Human resource capacity
– Child mortality
– HIV, TB, etc.
Crime Prevention
– Detective and investigation
services
– Improving court processes
•
Infrastructure
– Water, sanitation, housing,
electricity, public transport
•
(Rural ) Poverty Alleviation
– Raise rural incomes
– Improve livelihoods (access to
arable land, agri services)
Infrastructure Spending
• Public sector infrastructure spending, R568.1bn (+18.0% y/y/) over
medium term (Expect R70bn+ more)
• Capex to total expenditure expected to rise from 6.3% in 2004/05 to
11.0% in 2010/11
(MTBPS 2008)
On Whose Books?
Credit Rating?
•
•
•
•
Total: R342.8bn
73% Generation
12% Transmission
10% Distribution
Many Smiles…
Social Grants Beneficiary Numbers
Grant Type
(‘000)
2003
2006
2007
2008
(projected)
% Change
2003-2008
Old Age Grant
2,022
2,144
2,195
2,225
10%
Disability Grant
953
1,319
1,422
1,409
47.8%
4
3
2
2
-50.0%
Foster Care Grant
138
313
400
446
223.2%
Care Dependency Grant
(disabled)
58
94
98
110
89.7%
Child Support
2,630
7,045
7,863
8,208
212.1%
Total
5,808
10,918
11,991
12,402
106.5%
War Veterans Grant
Source: 2008 Budget
2008: 12.5m recipients
26.0% of SA population
Fraud!! – R1bn annually
Changes to Social Grants
Grant Type (R)
2007
2008
2009 Efficient
Est
Cost to State
Old Age Grant – men age 61
(63)
870
940
1050
R3.0bn
Disability Grant
870
940
1050
R1.8bn
War Veterans Grant
890
960
1080
R0.0bn
Foster Care Grant
620
650
720
R0.4bn
Care Dependency Grant
(disabled)
870
940
1050
R0.2bn
200
220
250
R3.0bn +
(R3.0bn?)
200
210
240
Child Support 18yrs?
Grant in Aid (full-time
attendance)
n/a
Source: 2008 Budget
Additional: R8.3bn (R11.3bn?)
Other Expenditure







Surge in Social Spending
Wage Subsidy (<R46k)
Job Security/ UIF
More for Education and Health
More for Land Reform Budget
Service delivery to get more and more
Capital spending
 World Cup
 Housing
 Let’s hope; safety and security - World Cup
JZ’s Plans…
(Manifesto)
Spending Plans..
Education
Health
Poverty
Alleviation
Manifesto
?
?
?
Budget
2008/09
R120.5bn
R72.9bn
R105.1bn
TOTAL
R120.5bn
R72.9bn
R105.1bn
Manifesto: Education
Approximate Cost to
Taxpayer p/y
60.0% of Schools No-Fee
R2.0bn
Recruiting 15 000 Pre-School
teachers/helpers
?
Sport Facilities for Poorer
Schools
?
Free School Feeding for all
poor pupils
?
TOTAL
R2.0bn
Spending Plans..
Education
Health
Poverty
Alleviation
Manifesto
R2.0bn+
?
?
Budget
2008/09
R120.5bn
R72.9bn
R105.1bn
TOTAL
R122.5bn
R72.9bn
R105.1bn
Manifesto: Health
Approximate Cost to
Taxpayer p/y
Hire More Nurses on Better
Pay Scales
R?
Reopening of Training
Colleges
R?
Boosting fight against
HIV/Aids
R?
Publicly Funded National
Health Insurance System
within next 5 yrs
R?
TOTAL
R?bn
Spending Plans..
Education
Health
Poverty
Alleviation
Manifesto
R2.0bn+
Rbn?
?
Budget
2008/09
R120.5bn
R72.9bn
R105.1bn
TOTAL
R122.5bn
R72.9bn
R105.1bn
Manifesto: Poverty Alleviation
Approximate Cost to
Taxpayer p/y
Raising cut-off age to 18yrs
for child support grant
R3.0bn
Extension of unemployed
insurance to cover more
unemployed adults
R17.0bn
“Active measures” to cushion
poor from global financial
crisis
R20.0bn
TOTAL
R40.0bn
Spending Plans..
Manifesto
Education
Health
Poverty
Alleviation
R2.0bn+
Rbn?
R40bn+
Budget
Deficit:GDP
=
5.0%
?
Budget
R120.5bn
R72.9bn
R105.1bn
2008/09
(3.4% prev)
TOTAL
R122.5bn
R72.9bn
R145.1bn
Taxpayer’s Pains…
The Salary Story….
Total
Remuneration
Salaries/
GDP @ cap
Salaries/
Ave Grant p yr
President
R 2,107,224
51
187
Speaker:
National Assembly
R 1,896,546
46
168
Minister
R 1,612,053
39
143
Deputy Minister
R 1,327,560
32
118
House Chairperson
R 1,232,766
30
109
R 1,043,067
25
93
R 691,641
17
61
R 322,899
8
29
Parliamentary
Council:
President
Member of
Parliament
Municipal Counselor
Qualified Audit Opinions:
General Report of the Auditor General on Audit Outcomes for the Financial Year 2006-07
Department
Arts & Culture,
Sport & Recreation
Public Works
Independent Complaints
Directorate
Land Affairs
Transport
Labour
Justice
Parliament
Health
Defence
Correctional Services
Water Affairs & Forestry
Home Affairs
2002-03
2003-04
2004-05
2005-06
2006-07
Introducing…
The White Elephants
Elephant #1: SAA
Public vs Private
SAA
Comair
2006:
Profit/(Loss)
(R883.0m)
R 78.8m
2007:
Profit/(Loss)
(R850 m)
R 109.2m
Employee/
Aircraft Ratio
Profit..“Restructuring costs”
8 227/58 =
1559/23 =
147
68
Dumbo 2 & Dumbo 3:
Sentech
Denel
(R85.3m)
(R 1,3 bn)
2007: Profit/(Loss)
(R 17.6m)
(R 549.1m)
2008: Profit/(Loss)
R17.5m
(R 347.2m)
TOTAL
RECEIPTS
(R 85.4 M)
R 457 M
(R 2,2 BN)
R 2.0 BN
2006: Profit/(Loss)
Revenue
Mercy Please Trev?
Efficient’s Possible, Likely,
Probable New Tax Table
2008/09
Taxable Inc (R)
2009/10
Rates of Tax
0 – 122 500
18%
Taxable Inc (R)
Rates of Tax
0 – 135 000
18%
122 501 – 195 000
R21 960 + 25%
135 001 – 210 000
R24 300 + 25%
195 001 – 270 000
R40 210 + 30%
210 001 – 300 000
R43 050 + 30%
270 001 – 380 000
R62 710 + 35%
300 001 – 420 000
R70 050 + 35%
380 001 – 490 000
R101 210 + 38% 420 001 – 550 000
R112 050 + 38%
490 001 –
R143 010 + 40% 550 001 –
R161 450 + 40%
Rebates
Primary
Rebates
8 280
Primary
Tax Threshold
Below 65
9 000
Tax Threshold
46 000
Below 65
50 000
Effect of Adjustment
Income
2008/09 Tax
2009/10 Tax
Difference
R100k
R9 720
R9 000
R720 (7.4%)
R150k
R20 555
R19 050
R1 505 (7.3%)
R200k
R33 430
R31 550
R1 880 (5.6%)
R300k
R64 930
R61 050
R3 880 (6.0%)
R400k
R100 530
R96 050
R4 480 (4.5%)
R500k
R138 730
R133 450
R5 280 (3.8%)
“Cost” = R8.0bn
Do not cover inflation!
Income Tax: Indiv. & Companies
Type
2008/09
Possible changes ?
Medical Aid Contributions
R570 first two members
(R530, +7.6%)
R345 second members
(R320)
R630 first two members
(10.5%)
R380 second members
(10.5%)
Interest Exemption
R19 000 (R18k)
R25 000
Capital Gains Tax
R16 000 (R15k)
R20 000
10%
Replaced by Dividend
withholding tax
STC
SME
Presumptive Turnover Tax
< R100k
Include Professional
service providers?
(accountants, optometrist
Zero
R100 001 – R300k
2.0% > 100k
R300 001 – R500k
R4000 + 4.0%
R500 001 – R750k
R12 000 + 5.5%
R750 001 – R1m
R25 750 + 7.5%
Bracket Adjustment
Carbon Tax
Paying for your footprint?
•
2008 Budget Proposal:
–
–
•
•
•
R100/ton on carbon dioxide equivalent
Increased to R250/ton by 2010
SA economy based on (low priced) carbon intensive
energy
Involve electricity demand management, renewable
energy and reduction in emissions (Min. V Schalkwyk)
Cap-and-trade system (Deloitte)
–
Incentivise behavioral change
Large Industrial Projects
•
•
•
R5bn of tax incentives for ‘large projects’ meeting SA’s
‘industrial-policy objectives’
R10bn over next three years
To replace oversubscribed strategic industrial projects
incentive.
Electricity Levy
–
–
–
–
Where’s the incentive?
Where’s the alternative?
Estimated R2.0bn to revenue in 2008/09 and R4bn in
2009/2010.
2c/kWh up to 4c/kWh?
Life’s Little Pleasures
Sin Taxes’ contribution to state revenue fiscal 2008/09 (09/10):
Beer R5.5bn (R5.8bn)
+ Wine and spirits R3.0bn (R4.3bn)
+ Cigarettes R8.5bn (R9.6bn)
= R17.0bn (2.8% of revenue) (R19.7bn) (2.9% exp)
Disposable income under pressure…?
What Else…
Forex Controls
- Blessing or Burden?
•
Blessings:
– Protect from risky international investments
– We need to keep capital in SA
– “Unpatriotic”
• Burdens:
– Capital should be free to flow to highest yield
– Limits business and economic growth
– Complicates international investment structures
– The return of the “FORWARD BOOK”
Cost of Forex Controls
Source: SARB
Talking about the SARB…
Central
Banker
Country
GDP @
cap
PPP $
Salaries, Salaries/
PPP $ GDP p cap
CPI
Joseph Yam Hong Kong
44,413
913,262
20.6
2.7%
Mervyn King
BOE
36,571
440,063
12.0
3.1%
ECB
33,882
289,352
8.5
1.1%
SARB
10,187
814,751
80.0
10.1%
Mark Carney
Canada
39,339
297,617
7.6
1.2%
Ben
Bernanke
US
47,025
144,059
3.1
0.1%*
Jean-Claude
Trichet
Tito
Mboweni
* y/y, all urban consumers
… or a jump to the reality!
An (affordable?) Wish List
Based on fiscal 2008/09 estimates
Tax Category
PIT (Mid/high income)
Company tax
Wishes Granted in 2008
We want more!
Lower
Lower
Lower
✓
Lower (i.e. R5.8bn loss in
revenue, per 1%)
STC
Lower/Scrap
Scrap (R20.0bn loss)
VAT
Higher
Higher (i.e. R11.0bn gain
in revenue, per 1%)
Transfer duty
Abolish
Abolish (R6.0bn loss)
Lower/Scrap
Lower/Scrap (SACU
outflow!!)
Customs Duties
Small comp. VAT returns
Flat tax rate
Lower frequency/Higher
threshold ✓
22%
… or just a jump?
Manuel: Lucky number 13?
Possible successors:
• Mandisi Mphalwa (Min. trade and industry)
• Ndlanhla Nene (Deputy Finance minister)
• Cyril Ramaphosa (businessman, ex politician)
• Max Sisulu (ANC national executive committee)
Authourised Financial Services Provider – FSP No: 859
www.efgroup.co.za