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Budget 2014
SAIT’s commentary
OVERALL
• Congratulate the Minister on a rational budget
• Considering substantial challenges facing SA
• Expenditure ceiling welcomed
• Performance of the economy and economic
growth are crucial to SA’s future success
OVERVIEW OF COMMENTS
Foreign Direct
investment
Innovation
(FDI)
(R&D)
Reduction in
Indebtedness
(Savings)
Entrepeneurship
(Small business)
Economic
Growth
SMALL BUSINESS RELIEF
•
Foreign Direct
investment
•
•
Innovation
(FDI)
(R&D)
Reduction in
Indebtedness
(Savings)
Entrepeneurship
(Small
business)
•
Economic
Growth
•
Streamling SBC, TT, VCC
regime welcomed
However:
SBC regime replacement – ?
await further details of
rebates before commenting
Turnover tax – sufficient to
get informal sector in tax
net? Relax entrance &
compliance requirements,
improve marketing &
enforcement
Turnover Tax - Reduce
compliance costs, then why
take away 4 mthly VAT
submission?
SMALL BUSINESS RELIEF
Foreign Direct
investment
(FDI)
Entrepeneurship
(Small
business)
Innovation
(R&D)
Reduction in
Indebtedness
(Savings)
Economic
Growth
• Grants tax exempt –
welcomed, abuse to be
monitored, s12P
interaction?
• VCC changes – welcomed
but perhaps more needs to
be done
• CONCLUSION:
• Good changes, but
• Regular (yearly)
monitoring of effectiveness
of incentives
SMALL BUSINESS RELIEF
•
•
Foreign Direct
investment
(FDI)
Innovation
•
(R&D)
•
Entrepeneurship
(Small
business)
Reduction in
Indebtedness
(Savings)
Economic
Growth
•
•
•
SEZ–
Bad news = C/Y & P/Y grant &
incentive allocations in DTI
budget (R5.5m vs R5.4m)
almost the same
Good news = Next 2 years
12,8% p.a. increase
Bad news = R550m decrease in
incentives estimates (SEZ
legislation still being finalized)
No news = on 15% SEZ tax
rate + 10 yr window period
CONCLUSION:
No new incentives for SMMEs
(Enterprise Investment Pgm
closed in Sept 2013 & no
replacement announced)
SMALL BUSINESS RELIEF
•
Foreign Direct
investment
(FDI)
Entrepeneurship
(Small
business)
Innovation
•
•
(R&D)
Reduction in
Indebtedness
(Savings)
•
Economic
Growth
•
•
•
TRAVEL DEDUCTIONS–
New tables to claim
deduction for personal use
result in punitive changes
Car value = R160 000
Fixed cost reduction reduced
by 11%
Despite fuel & maintenance
costs increasing, increases
not in line with actual costs
Car value = R313 000
Fixed cost reduction reduced
by 7%
Fuel & maintenance costs
reduced by 7.5% and 23%..
SMALL BUSINESS RELIEF
Foreign Direct
investment
(FDI)
Entrepeneurship
(Small
business)
Innovation
(R&D)
Reduction in
Indebtedness
(Savings)
Economic
Growth
• EMPLOYMENT TAX
INCENTIVE
• Meaningful to SMMEs
• Congratulations on success
of January take-up
• Look forward to further
updates on its effectiveness
• OVERALL CONCLUSION
• Need for a comprehensive
co-ordinated SMME Plan
• Davis Committee Report
feedback guidance
FOREIGN DIRECT INVESTMENT
•
•
Foreign
Direct
investment
•
Innovation
(R&D)
(FDI)
•
Entrepeneurship
(Small
business)
Reduction in
Indebtedness
(Savings)
Economic
Growth
•
•
•
•
CORPORATE TAX RATE
To be “gateway to Africa”
HQC regime not enough
Global trends suggest SA’s
corporate tax rate (28%) is
high
VAT rate (14%) is low
CONCLUSION
Cut corporate tax rate;
Increase VAT rate
Formalise SA’s International
Tax Strategy
Create certainty (transfer
pricing) & stabilility
RESEARCH AND DEVELOPMENT
Foreign Direct
investment
Innovation
(FDI)
Entrepeneurship
(Small
business)
(R&D)
Reduction in
Indebtedness
(Savings)
Economic
Growth
• LIMITED SUPPORT
• NDP = innovation hub of
Sub-Sahara Africa….
• But support by
government to private
sector limited
• Section 11D deduction=
declined by 65% from
2010/11 to 2011/12
• Not a healthy situation
RESEARCH AND DEVELOPMENT
• R&D as a % of GDP in
South Africa
• Since R&D incentive
introduced in 2006, R&D
has steadily dropped
• Reasons:
• Numerous changes in
legislation
• Administration of regime
• Concern:
• Support Programme for
Industrial Innovation
reduced from R200m to
R50m – SMMEs affected!!
RESEARCH AND DEVELOPMENT
• SOLUTION:
• DST to alleviate backlog on
approval process;
• DST to promote
participation in incentive
• National Treasury must
refrain from making more
changes
• Certainty is needed!
SAVINGS & RETIREMENT REFORMS
• Commend:
Foreign Direct
investment
– Reinforcing need for
individual savings
– Increase in retirement tax
free-lump sum
Innovation
(FDI)
(R&D)
Reduction in
Indebtedness
(Savings)
Entrepeneurship
(Small business)
Economic
Growth
• Look forward to details of
tax efficient savings
vehicles
OTHER ISSUES
•
•
•
•
•
•
•
•
•
•
•
Increase in rates needed:
Estate duty abatement
Donations tax exemption
Donations tax deduction
limitation percentage
Further clarification:
Social Security System
Gambling Tax
National Health Insurance
Carbon Tax
Taxation of trusts
Restrictions on IP under
exchange control regulations
•
•
•
Tax Design Process
NT and SARS commended
on workshops held to date
Should be applied to all
legislation to prevent
implementation with a ‘catch
all phase’ and then a
narrowing down.
WISH LIST:
• Reduce wasteful expenditure
• Link government spending to
specific programs
• Accountability for non-delivery
• Prioritization of issues
• Formalise clear and consistent
economic plans for:
–
–
–
–
Small businesses
Foreign Direct Investment
R&D
Savings