Taxpayers wait for Tito’s Budget speech
By Opinion 31m ago
Share this article:
THE planet is a poorer place because of the pandemic, and South African taxpayers are waiting with bated breath for this year’s Budget Day. Most don’t know what to expect, but are praying Treasury will address the current financially distressed situation.
Globally there is a new wave of enthusiasm that the duration of the pandemic will be short-lived given the distribution of vaccines has commenced. South Africa has in place a widespread and a reliable distribution network that can potentially vaccinate 66.6% of the population before the end of this year.
A single vaccine does not provide complete coverage, and it is likely AstraZeneca will give booster shots that can help tackle the 501.V2 variant.
It is alleged the Pfizer vaccine offers over 90% protection against the 501.V2 variant. South Africans have already received some of the promised vaccines and the roll-out have commenced.
Vaccines can best be thought of as seatbelts or airbags in our motor vehicles. They do not provide 100% protection but are still highly recommended.
While the battle against the pandemic could be over in the short to medium term for the rest of the world; the financial woes caused to individuals, businesses and the economy in South Africa will be with us for a while.
The National Treasury is expected to release a special Bill on Budget Day – February 24 – covering all changes relating to the post-pandemic era and including the new “normal” scenario of working from home. This special Covid-19 bill will address Covid-19 in relation to health, local government, labour and tax legislation.
What tax changes can we expect on Budget Day this year?
During lockdown level four and five early last year, the SA Revenue Service (Sars) took the position it would introduce more liquidity into the economy.
These measures included the move away from submitting a two-month VAT return (Vendors A & B type) to a monthly submission of VAT return. Employers could also defer their PAYE and provisional tax obligations.
There is a view held by a few tax specialists that both Sars and National Treasury are still of the view that “creative” ways are still needed to inject resources into the economy.
All tax authorities, including the OECD, hold the view that the pandemic will be short-lived and that the financial injury to the economy will be long lasting.
All revenue authorities in the world are clear that resources must be injected into the economy. Hence both Sars and National Treasury are no different.
Countries have survived the economic ravages of World War II, why should we not recover from the ravages of a different type of world war?
There is a lot of talk about increasing tax rates all over the world. In the US, for example, there is talk about placing a one percent wealth tax on all “intangible” financial assets held by a US resident.
However, there are other ways of increasing government revenue without tampering with the tax rate. Such as:
– Taxing sectors that are not yet in the tax net such as witchcraft, which is a major sector in most of the Latin American and Asian countries. Elementary evidence suggests thus far that only Romania taxes this craft.
– Sars can expect more revenue from its recently introduced R1.25 million foreign employment income tax exception.
– Intensifying the auditing of transactions subjected to transfer pricing.
– Reviewing the taxing of international digital companies.
* Mahomed Kamdar is a tax specialist with the South African Institute of Professional Accountants (Saipa).
** The views expressed herein are not necessarily those of IOL.