We gauged the response across political and business spectrums following Finance Minister Pravin Gordhan's budget speech. It seems he won their favour.
Companies received the lions' share of attention when it came to taxation, some of it positive, such as incentivising small business, but much of it is intended to ensure greater compliance and to look at ways to increase the contribution of corporates.
It was clear from both Finance Minister Pravin Gordhan's speech on Wednesday and the budget itself that he would be seeking to increase tax revenue received from the corporate sector this financial year.
In his speech, Gordhan said the treasury "owed it to taxpayers to ensure that they are not carrying the burden of those who benefit from the country's infrastructure and resources without paying their fair share of costs".
He then went on to say that it was unacceptable that corporates with base operations in South Africa had shifted a "large portion of their profits to low-tax jurisdictions" to avoid paying their taxes here.
The South African Revenue Service (Sars) is meeting the companies that have been identified. This is part of its efforts to combat tax avoidance, the abuse of tax treaty benefits, incomplete disclosure and fraudulent claims, which have been recognised as a problem by the Group of 20 countries, of which South Africa is a member.
Single registration process
In a bid to improve administration, a single registration process for multiple tax products is to be launched to simplify registration for all businesses. Registration for value-added tax (VAT) will also be streamlined.
Small businesses will benefit from these improvements. A new income tax will be introduced that requires fewer questions to be filled in by such businesses, making it easier for them to file.
The misuse of debt by companies trying to reduce the amount of tax they pay was also highlighted by Gordhan, who said this would be a priority for Sars.
An area highlighted by the minister was the acquisition of debt against future earnings. He said, not only did this eliminate taxable profit for years to come, but new acquisitions also ensured that the company remained in debt, reducing its taxable earnings. Interest on debt would now be allowed to roll over for a five-year period.
The issue of mining taxes was addressed to some extent in the budget, with the treasury saying it planned to conduct a review of the mining and petroleum tax regime as part of a "broader tax review" to determine whether it was "sufficiently robust", while ensuring that South Africa remained a competitive investment destination.
On the corruption side, a new system being tested by Sars is expected to come into effect soon that will make it possible for the government to identify and reject companies that are not tax compliant. This, the treasury said, "will enable the real-time tracking of the tax compliance of the person who tendered".
Research on tax returns
Sars is also conducting research on the tax returns of companies that have received government tenders to ensure that full disclosure is made. The tightening up of this process has long been identified as a key way to reduce widespread and costly corruption in government tenders.
Foreign firms are also addressed in the budget, specifically those supplying digital goods. They were previously exempt from VAT because of a loophole. It appears that companies that supply digital goods, e-books or music are now eligible for tax, because border posts and post offices cannot act as collection agents.
Employment share schemes have come under scrutiny once again. According to the treasury, they are still being used to reduce the tax rates of high-income earners in companies.
The budget does contain some good news for companies. The minister plans to increase the economic incentives for identified special economic zones, providing a 15% corporate income tax for businesses in such areas and accelerated depreciation allowances for buildings in these areas.
Special support for businesses
​The government is also considering special support for businesses with both a social and profit-making objective. Adjustments have been made to organisations with donations to public-benefit groups working in areas of health, education, conservation and animal welfare, with the donation being deductible for up to 10% of taxable income in the year the donation is made.
So as not to discourage large donations, the government plans to allow donations in excess of 10% to be rolled over to the next year as allowable deductions.
The passing of youth employment tax incentives to encourage the hiring of young people was highlighted. It will create a graduated tax incentive at the entry-level wage, falling to zero when earnings reach the personal income tax threshold.
A number of tax amendments were announced in the budget review, including the tightening up of criteria relating to research and development claims, VAT being extended to vehicles that can carry only one passenger and the implementation of a new gambling tax at the end of 2013.
The budget review states in its conclusion that it plans to protect its tax revenue base while maintaining a fair tax system.
It said that present tax reforms sought to improve the robustness of tax collection by ensuring that cross-border commerce, for example, was subject to VAT.
The treasury said tax-collection estimates depended on the economic environment and the country's growth rate.