Brace for the year of tax

Johannesburg - The implementation of the carbon tax, which has been on the cards for years, was likely to be deferred to 2018, Nazrien Kader, Deloitte Africa head of taxation services, said this week.

Izak Swart, Deloitte carbon tax director, said: “The tax has been kicked down the road for years.”

The carbon tax had resulted in “divisive” debates between environmentalists who strongly support it and heavy industry that is vehemently opposed to it.

Factors that would increase the chance of the tax being implemented were that South Africa had signed the Paris Agreement that dealt with greenhouse gas emissions mitigation, adaption and financing starting in 2020, Swart said.

Government had also written software programs for the carbon tax, Swart said.

“Implementing the tax is complex. Uncertainty is not good for investor confidence, so the carbon tax issue should be resolved,” he said.

Turning to Gordhan’s budget speech on February 22, Kader said that there would be an increase in taxes across the spectrum.

Gordhan was likely to balance the need for austerity with the need for expansion, Kader said.

She was hopeful that the ratings agencies would heed the efforts that Gordhan and government were making and allow South Africa to maintain an investment grade rating.

In his “mini budget” in October last year, Gordhan flagged that National Treasury would need to find R28bn in extra revenue in the tax year to February 2018.

In 1994, there was a transitional levy tax that was imposed, Kader said, and that was a one-off tax. There was scope for another such one-off tax, such as a wealth tax, that could be imposed to balance government’s books, she said.

The average VAT rate in Africa was 15.25%, which compared with South Africa’s VAT rate of 14%, she said. However, any increase in the VAT rate would be “very unpopular”, Kader said. She added that she was in favour of a tiered VAT system.

Gordhan was likely to lessen fiscal drag, which is the relief given to taxpayers owing to inflation, as a means to get more money in the coffers, she said.

Sin taxes and the fuel tax were likely to increase by more than inflation, Kader said.

The special voluntary disclosure plan closes in June 2017 and could bring in R10 billion in tax revenue for government, Kader said. The last time a tax amnesty was offered, it gave government a R48 billion boost.

Gordhan announced in his mini budget that all government tax incentives were under review and that the review would be completed in October.

Nazeer Essop, Deloitte public sector leader, said that the growth in tax collection was moving much faster than the growth in the economy.

Essop said that corruption was still rife in government and so was “fruitless and wasteful” expenditure.

Billy Joubert, Deloitte transfer pricing director, said that transfer pricing documentation in South Africa had become compulsory.

Transfer price rules are aimed at preventing multinational groups from shifting profits to low-tax jurisdictions.

Complying with transfer-pricing regulations was becoming a “massive challenge and quite draconian”.

“Transfer pricing is a high-risk area for our clients,” Joubert said.

Ashleigh Theophanides, Deloitte healthcare actuary, said there was a lot of uncertainty around the financing of National Health Insurance.