Billy Joubert, director of tax at Deloitte, said on Tuesday during a pre-budget seminar that no rate changes to personal income-tax rates are expected, while at best the corporate tax rate may be cut to 28% from the current 29%.
Joubert noted that South Africa’s corporate tax rates compare favourably with other countries, but that cutting further would make companies more competitive.
While he does not expect the value-added tax (VAT) rate to be increased, Joubert said some changes to the threshold are long overdue.
“It has not been adjusted for inflation and has been at R300Â 000 for years [on gross turnover],” he explained. “It will be very interesting to see if there is something on that.”
Joubert noted: “It has been suggested that, in order to discourage spending, an increase in the VAT rate should be considered. However, this is likely to be politically unpopular since VAT is seen to be a tax which impacts on the poor.”
He pointed out, though, that this argument also has its flaws as key items such as bread and milk are zero-rated anyway and rent, interest and school fees are also exempt.
South Africa has been adopting a policy of increasing interest rates to attempt to crimp back spending, but some analysts have noted that this only adds to the cost pressures and some have said a higher VAT rate may help.
Joubert notes that while the introduction of a system involving the payment of royalties to the state by mining companies will happen in 2009, mining companies and investors will want to know when this legislation will be finalised and what further changes, if any, can be expected to the draft legislation.
There have so far been two versions of the draft royalty Bill — one during March 2003 and one during October 2006.
On the individual tax front, Joubert expects to see increases in the interest and foreign dividend income-tax threshold. This will be in line with encouraging people to save for their retirement, he notes.
The threshold currently stands at R18Â 000 for taxpayers under 65 and R26Â 000 for those over 65. Joubert says when combined with a partner, this rate is fairly useful on the savings front.
Deloitte’s Delia Ndlovu says there may be changes to the provisional tax system, as it has been difficult to enforce. She adds that the monthly medical caps may also be increased as the amount is too low at the moment for second members.
Joubert says that some feedback on the small-business tax amnesty may be forthcoming. “It has pulled a lot of businesses into the net,” he said.
He concludes that another key corporate tax issue to watch out for is assistance to small, medium and micro enterprises to encourage growth. — I-Net Bridge
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