What's expected from the National Budget this year...
FINANCE Minister Pravin Gordhan is expected to give an update on the new dividends tax in his Budget speech tomorrow.
"It's still likely the case that the new dividends tax will only replace Secondary Tax on Companies towards the end of this year, or even next year, but hopefully the speech will give an indication as to when the new tax will come in," according to David Warneke, BDO's national tax director.
Some double tax agreements have not yet been signed.
"This is definitely holding the process up as the wheels turn slowly when it comes to double tax treaties," Warneke said.
He noted that in the last budget, Gordhan said Treasury was investigating whether estate duty should be abolished as Capital Gains Tax was also payable on death.
"However, I'm not sure that he'll make an announcement at this time, although it would be welcomed," Warneke said
While Gordhan may not touch on estate duty in this year's budget, Warneke said at some point Treasury will study the matter.
Estate duty is an important part of estate planning and some clarification would "help consumers to plan their estates with more confidence".
Warneke said little tax relief for consumers is expected and whatever they do receive will do no more than counteract inflation's effects.
While there will be the usual inflation-induced bracket creep adjustments, these will probably be primarily for lower-income groups.
"Normally what happens is that at every Budget there is pressure to give concessions to the lower end, given South Africa's history.
"It's worth noting research done in the US. When they've had tax rate reductions, they've actually collected more revenue as these deductions encourage businesses to go out and produce more income knowing that they won't be taxed at a high rate.
"Treasury is under pressure to collect."
He noted there was also a possibility that Gordhan would announce a change to the way in which medical deductions may be calculated.
"He could possibly cap medical deductions for high-income earners."
However, as local elections are near, Value Added Tax will not be raised, Warneke said.
"VAT is a very unpopular tax anyway - the trade unions hate it."
Little room for tax relief
What's expected from the National Budget this year...
FINANCE Minister Pravin Gordhan is expected to give an update on the new dividends tax in his Budget speech tomorrow.
"It's still likely the case that the new dividends tax will only replace Secondary Tax on Companies towards the end of this year, or even next year, but hopefully the speech will give an indication as to when the new tax will come in," according to David Warneke, BDO's national tax director.
Some double tax agreements have not yet been signed.
"This is definitely holding the process up as the wheels turn slowly when it comes to double tax treaties," Warneke said.
He noted that in the last budget, Gordhan said Treasury was investigating whether estate duty should be abolished as Capital Gains Tax was also payable on death.
"However, I'm not sure that he'll make an announcement at this time, although it would be welcomed," Warneke said
While Gordhan may not touch on estate duty in this year's budget, Warneke said at some point Treasury will study the matter.
Estate duty is an important part of estate planning and some clarification would "help consumers to plan their estates with more confidence".
Warneke said little tax relief for consumers is expected and whatever they do receive will do no more than counteract inflation's effects.
While there will be the usual inflation-induced bracket creep adjustments, these will probably be primarily for lower-income groups.
"Normally what happens is that at every Budget there is pressure to give concessions to the lower end, given South Africa's history.
"It's worth noting research done in the US. When they've had tax rate reductions, they've actually collected more revenue as these deductions encourage businesses to go out and produce more income knowing that they won't be taxed at a high rate.
"Treasury is under pressure to collect."
He noted there was also a possibility that Gordhan would announce a change to the way in which medical deductions may be calculated.
"He could possibly cap medical deductions for high-income earners."
However, as local elections are near, Value Added Tax will not be raised, Warneke said.
"VAT is a very unpopular tax anyway - the trade unions hate it."
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