Johannesburg - The 2010 national Budget, the first to be tabled by Finance
Minister
Pravin Gordhan, is likely to present a number of challenges for the
government.
It would be one of the most difficult to balance because of the
economic downturn, public sector borrowing at 12% of GDP,
and expectations of delivery on social security promises, Absa's
head of group tax Etienne Louw said in a statement on Friday.
With an estimated shortfall of R70bn in revenues collected
during the 2009/2010 year, Louw expected the National Treasury to
look for new ways to boost government coffers and control
expenditure.
"The minister may announce changes that may impact on dividend
funds, as this could provide additional revenue," he said.
"The National Treasury has been investigating dividend funds,
and the Financial Services Board gave an earlier warning that there
may be changes to tax collection in this area."
Louw said the National Treasury was reviewing the "four fund
approach"
applicable to life companies, which could impact on the taxation of
long term insurers.
"We don't expect a detailed announcement this week, but National
Treasury may indicate that they are investigating the situation,"
he said.
Any Budgetary relief to cater for the impact of inflation would
probably benefit lower income earners, especially those in the
bracket below R132 000.
Louw said the tax threshold of R54 000 a year was likely to rise
to cater for the impact of inflation, while the top marginal tax
rate was likely to remain at 40%.
"A small percentage of those registered for personal income tax
already carry much of the personal tax burden."
He said that in the light of increasing electricity prices,
there might not be much more room to squeeze the existing tax base
much further.
It was unlikely that any new taxes would be announced because of
the administration costs involved and the increased burden on
existing taxpayers.
Louw did, however, expect the minister to provide more
guidelines on how a new carbon tax, announced last year, would
affect taxpayers.
New provisions which come into effect at the beginning of March
and require taxpayers with travel allowances to keep detailed log
books would affect a large number of taxpayers in the next tax
year.
"These changes may offset any relief they get from a personal
income tax perspective," Louw said.
Although it was previously indicated that the date of
implementation of a
new withholding tax on dividends to replace Secondary Tax on
Companies
(STC) was to be the end of 2010, Louw believed it was more likely
to be next year or even the following year.
"Under the current STC system, government is able to collect
more revenue than it will be able to under the new regime, so it's
unlikely to introduce the changes at a time when it needs to boost
revenue," he said.
"In addition, negotiations around and ratification of Double Tax
Agreements with some nations have not yet been completed."
The government might also seek to make South Africa a more
favourable jurisdiction for setting up a holding company to
stimulate investments in South Africa, Louw said.
"At the moment, there is leakage for companies doing business
into Africa.
"Government could certainly introduce changes to make it more
attractive to invest on the continent."
Announcements in respect of group taxation (to provide further
relief to a group of companies), as well as VAT relief in respect
of Islamic Banking products, might also feature in the Budget.
"Absa does not expect any changes to be made to the company tax
rate or to the VAT rate in Wednesday's announcement, while sin
taxes such as those imposed on cigarettes and liquor are likely to
increase above inflation," Louw said.
- Sapa