Cape Town – South Africans can brace themselves for tax increases in the upcoming national budget, Nazrien Kader, Africa tax lead at Deloitte, told Fin24 on Thursday.
“We know there will be tax increases, that is not debatable. We just don’t know where these will be from,” said Kader.
In her view Finance Minister Nhlanhla Nene has various options for tax increases.
Firstly, it is possible for him to increase the marginal rate of tax for individuals - an option that won’t be popular.
By the late 1980s it was between 43% and 45% and currently sits at 40%.
“An increase to even 45% would be in line with the approach of larger economies in the world,” said Kader.
Secondly, Nene could opt for above inflation increases in indirect taxes like the fuel levy and so-called sin taxes.
Thirdly, he could choose to approach tax increases from a capital gains tax perspective (CGT). Currently South Africans pay CGT only on a third of the gain and Kader points out there is, therefore, scope to increase the proportion subject to CGT.
At the same time she thinks it would be too early for Nene to implement a so-called wealth tax or an additional “mansions tax” to tax the wealthy.
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Company tax
Regarding companies, Kader expects a more rigorous enforcement of current taxes. This will mainly be driven by efforts to curb so-called base erosion and profit shifting (Beps). Beps refers to tax planning strategies, primarily by multinational enterprises (MNEs).
MNEs supposedly exploit loopholes in tax rules in order to shift profits to jurisdictions where there is allegedly little real activity, but taxes are low.
This results in low overall corporate taxes being paid.
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Global trends
There are currently three mega trends in the world driving tax policies, according to Kader. These are globalization, an increase in value to intellectual property (IP), which is seen as movable and the ability to conduct business digitally.
“SA is usually one of the first emerging economies to implement tax proposals like those in place in larger economies,” explained Kader.
“Overall, tax laws are focused on what is happening on a local level, but businesses operate globally and that creates concerns that SA’s tax laws do not keep pace with changes in the business world.”
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Africa and the G20
As far as Africa’s role in the commitment by the G20 (the Group of Twenty international forum for the governments and central bank governors from 20 major economies) to global economic growth is concerned, Kader sees it as of critical importance.
“Africa is the voice of emerging markets and we have a moral obligation to speak on this as we bring a different perspective,” she said.
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