Martedì, 23 Febbraio 2016 20:21 | No tax hike a pleasant surprise for many South Africans

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Cape Town - South Africans generally should be pleasantly surprised that Finance Minister Pravin Gordhan did not raise marginal tax rates as expected, said Barry Knoetze, partner at PwC Tax.

“Many commentators predicted an increase in the marginal tax rates across most tax brackets but they have in fact remained the same.”

Taxpayers in the lowest tax bracket will be paying up to 11.8% less tax (on a taxable income of R85 000) and those who earn a taxable income of R1m per year will also be paying marginally less tax (0.6%) than what they currently are.

“When seen in isolation the non-increase in personal income tax is generally good news,” Knoetze said, “but taxpayers could be hit in other areas, depending on their personal circumstances.”

Gordhan raised the inclusion rate in capital gains tax from 33% to 40%, while the transfer duty for property sales of more than R10m also increased.

Greg Tyrant, associate director of tax at PwC, said he did not expect Gordhan to hike capital gains tax. “This narrows the arbitrage between capital and revenue gains for companies and trusts almost to the point where one wonders why one should distinguish between them at all.

“Also, South Africa has relatively high inflation (we've just seen a revision to 6.1%) and it has long been pointed out to National Treasury that taxing capital gains is akin to taxing inflation. The situation now becomes worse where these gains are taxed at higher effective rates,” Tyrant said.

Gordhan also announced the implementation of a sugar tax that will come into effect on April 1 2017. “The proposed sugar tax will have a negative impact on beverage companies,” said Mike Benetello, partner: mergers & acquisitions, at PwC Tax. He also has doubts about how government intends to regulate the proposed tyre levy.

The finance minister also said government has set its sights on base erosion and profit sharing by multinational companies. Transfer pricing and the introduction of “country-by-country” reporting, treaty shopping and interest deductions will receive special attention.

“However, no new major tax amendments are proposed in the international tax space,” said Osman Mollagee, partner: international tax at PwC. “The budget does however indicate that further tweaking of the existing rules around hybrid debt instruments and controlled foreign companies is expected."

The scrapping of the new withholding tax on services has also been proposed.

* Visit our special issue on Pravin Gordhan's 2016 Budget Speech.

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