PORTFOLIO AND SELECT COMMITTEES ON FINANCE 26 FEBRUARY 2002
2002/3 BUDGET
REVIEW OF 2001/02
2001/2 LEGISLATIONCapital gains taxStrategic investment incentivePAYE iro directors of private co.sAccelerated allowances for small business corporationsGroup re-organisation reliefDuty at sourceLicencing, registration and accreditation of customs business
REVENUE 2001/2
Sheet1
SARSTreasuryBudgetRevisedIncrease/
EstimateEstimateEstimateEstimate(Decrease)
Source of Revenue2000/012000/012001/022001/02
R'000R'000R 'millionR 'millionR 'million
Individuals86,000,00087,820,80090,12291,000878
Companies26,000,00024,765,93029,96044,00014,040
Secondary Tax on Companies4,2006,7002,500
Tax on Retirement Funds6,3006,500200
VAT54,000,00053,469,80060,35058,600(1,750)
Other Taxes, Levies, Duties10,58410,933349
Customs8,000,0008,114,6579,2379,000(237)
Fuel levy14,800,00014,919,41015,31014,988(322)
Excise10,74510,485(260)
Total211,662,6650.0236,808252,20615,398
Percentage of GDP23.9%25.48%
Sheet1
IndividualsIndividuals8640000090122000
CompaniesCompanies2602500029960000
Secondary Tax on CompaniesSecondary Tax on Companies38000004200000
Tax on Retirement FundTax on Retirement Fund58000006300000
VatVat5400000060350000
Other TaxesOther Taxes66610007739000
CustomsCustoms80000009237000
Fuel levyFuel levy1490000015310000
ExciseExcise989600010800000
2000/2001
2001/2002
R ' 000
REVENUE PER TAX TYPE: 2000/2001 AND 2001/2002
Sheet2
Sheet3
REASONS FOR REVENUE TRENDS
Individuals
Growth in number of taxpayers as a result of tax base broadening
Real wage growth higher than anticipated
Companies
Increased provisional tax payments to reflect current profits
Increased taxability of foreign sourced income (i.e. foreign dividends)
Rise in profits of mining and other export sectors
Enhanced enforcement and compliance in banking sector
Change in taxation of long-term assurance companies
Secondary Tax on Companies
Increased cash distributions
VAT and Customs Duties
Slower than anticipated growth in consumption expenditure
Excise duties
Reduction in household consumption of excisable products
Names of 42 tax offenders have been published.Investigations conducted by SARSs Criminal Investigations division resulted in a total of 150 years of imprisonment for taxpayers who committed tax fraud. Customs stepped up anti-smuggling operations and targeted inspections.SARS shifted from audits of a single tax type to an integrated approach. Performed 180 412 Income Tax audits which resulted in additional tax assessed of R6.3 billion. Companies represent R4.9 billion Individuals represent R1.4 billion
OTHER REASONS
COMPARISON OF TAX RATES
Sheet1
1998/91999/20002000/012001/22002/3
Lowest personal bracket3100033000350003800040000
Lowest marginal rate19%19%18%18%18%
Floor for highest personal bracket120000120000200000215000240000
Highest marginal rate45%45%42%42%40%
Number of brackets66666
Primary rebate35153710380041404860
Additional rebate26602775290030003000
Tax threshold1850019526211112300027000
Company rate35%30%30%30%30%
STC12.5%12.5%12.5%12.5%12.5%
Sheet2
Sheet3
1995 - R2 billion1996 - R2 billion1997 - R2.8 billion1998 - R3.7 billion1999 - R4.9 billion2000 - R9.9 billion2001 - R8.3 billion2002 - R15 billionTotal = R48.6 billion
COST OF ADJUSTMENTS - PERSONAL INCOME TAX
TAX MIX OVER THE YEARS
Chart1
68.326.740.112.1864.1
77.730.34413.68.564.6
85.930.248.414.38.56.56.8
86.539.654.414.59.87.97.5
9158.658.61510.499.6
9065.766.215.211.110.59.8
Income Tax: Individuals
Income Tax: Companies, STC and Tax on Retirement Funds
VAT
Fuel Levy
Excise
Customs
Other
Sheet1
1997/81998/91999/20002000/12001/22002/3
Income Tax: Individuals68.377.785.986.59190
Income Tax: Companies, STC and Tax on Retirement Funds26.730.330.239.658.665.7
VAT40.14448.454.458.666.2
Fuel Levy12.113.614.314.51515.2
Excise88.58.59.810.411.1
Customs666.57.9910.5
Other4.14.66.87.59.69.8
165.3184.7200.6220.2252.2268.5
Sheet2
Sheet3
TAX MIX OVER THE YEARS
Chart1
68.326.740.112.1864.1
77.730.34413.68.564.6
85.930.248.414.38.56.56.8
86.539.654.414.59.87.97.5
9158.658.61510.499.6
9065.766.215.211.110.59.8
Income Tax: Individuals
Income Tax: Companies, STC and Tax on Retirement Funds
VAT
Fuel Levy
Excise
Customs
Other
Sheet1
R 'billion1997/81998/91999/20002000/12001/22002/3
Income Tax: Individuals68.377.785.986.59190
Income Tax: Co's,STC,RFT26.730.330.239.658.665.7
VAT40.14448.454.458.666.2
Fuel Levy12.113.614.314.51515.2
Excise88.58.59.810.411.1
Customs666.57.9910.5
Other4.14.66.87.59.69.8
165.3184.7200.6220.2252.2268.5
Sheet2
1997/81998/91999/20002000/12001/22002/3
Income Tax: Individuals41%42%43%39%36%34%
Income Tax: Co's,STC,RFT16%16%15%18%23%24%
VAT24%24%24%25%23%25%
Fuel Levy7%7%7%7%6%6%
Excise5%5%4%4%4%4%
Customs4%3%3%4%4%4%
Other2%2%3%3%4%4%
0165.3184.7200.6220.2252.2268.5
100%100%100%100%100%100%
Sheet3
20012002Companies and Close corporations - 0.95 m1,06 mIndividuals registered -2.9 m3.3 mIndividuals SITE -approximately 3 m3 mTrusts - 0.19 m0.23 m
VAT vendors0.474 mPAYE0.215 m
NUMBER OF TAXPAYERS
NEW TARGET 2002/03
R268.5 billion REVENUE TARGET 2002/3
NEW REVENUE TARGET
Sheet1
SARSTreasuryRevisedBudgetIncrease/
EstimateEstimateEstimateEstimate(Decrease)
Source of Revenue2000/012000/012001/022002/03
R'000R'000R 'millionR 'millionR 'million
Individuals86,000,00087,820,80091,00089,982(1,018)
Companies26,000,00024,765,93044,00050,8586,858
Secondary Tax on Companies6,7006,500(200)
Tax on Retirement Funds6,5006,900400
Vat54,000,00053,469,80058,60066,2007,600
Other Taxes, Levies, Duties10,93311,208275
Customs8,000,0008,114,6579,00010,5001,500
Fuel levy14,800,00014,919,41014,98815,166178
Excise10,48511,192707
Total211,662,6650.0252,206268,50616,300
Percentage of GDP25.5%24.80%
Sheet1
IndividualsIndividuals8640000090122000
CompaniesCompanies2602500029960000
Secondary Tax on CompaniesSecondary Tax on Companies38000004200000
Tax on Retirement FundTax on Retirement Fund58000006300000
VatVat5400000060350000
Other TaxesOther Taxes66610007739000
CustomsCustoms80000009237000
Fuel levyFuel levy1490000015310000
ExciseExcise989600010800000
2000/2001
2001/2002
R ' 000
REVENUE PER TAX TYPE: 2000/2001 AND 2001/2002
Sheet2
Sheet3
TAX GAP
Difference between revenue collected and the revenue that should be collected if the tax laws were complied with fully.Arises because taxpayers- are not aware of their obligations; choose to aggressively plan their affairs while purportedly adhering to the letter of the law; or simply flout their obligations and break the law.THE TAX GAP - DEFINITION
SARS and the National Treasury have begun with a project to identify the size and the composition of the tax gap.Currently estimated at more than R30 billion.Identify risk areas over the different tax types, e.g.Companies, i.e different sectorsIndividualsPAYEVATCustoms
QUANTIFICATION OF THE TAX GAP
SARS continues to make progress in reducing the tax gap byintroducing integrated audits and employ highly skilled specialists as part of the Woodmead projectputting the spotlight on arrangements and structures that lead to low effective tax ratesdoubling the number of personnel in SARSs Corporate Tax Centre by the middle of this yearextending compliance to areas of the economy where it is erratic or non-existent
INITIATIVES TO ADDRESS TAX GAP
Customs stepped up anti-smuggling operations and targeted inspectionsExtend tax awareness and compliance efforts to informal economyInitiate discussions on the regulation of tax consultants and tax advisors
INITIATIVES TO ADDRESS TAX GAP (continued)
Balanced approach between closing the tax gap and providing a good service.Those who do not contribute to the tax gap may expect initiatives to improve the level of service they receive as good citizens.Ensure that taxpayers that approach SARS voluntarily to meet their obligations will be met with a helpful and sympathetic reception. Introduce a dedicated Complaints Office independent from Branch offices.
SERVICE
BUDGET PROPOSALS 2002/03Tax avoidanceSimplification and reduced administrationEconomic stimulusThresholds
Deeming income provisions to enforce the taxation of foreign income in respect of foreign assetsTax trusts, other than special trusts and testamentary trusts established for the benefit of minor children, at a flat rate of 40 per centEliminate deemed accommodation expenditure against subsistence allowanceGeneral tax avoidance provision for Customs
MEASURES TO ADDRESS TAX AVOIDANCE
Change June tax year end individuals to end of FebruaryLimitation of employee deductionsIntroduce VAT retail method of accountingSimplify and consolidate tax formsEliminate excise on soft drinksRaise provisional tax threshold from R2 000 to R10 000
SIMPLIFICATION AND REDUCED ADMINISTRATION
Grant R15 billion tax relief to individualsIntroduce an accelerated depreciation allowanceIncreased exemption for domestic interest and dividendsRevised transfer duty ratesLower fuel levy on environmentally friendly diesel fuelsExtension of offshore diesel fuel concession Implement wage incentiveFurther relief for small business corporationsRemoval of certain transaction taxes,e.g. warrant repurchases by issuers, issue of debt instruments and cession of mortgage bonds.
ECONOMIC STIMULUS
Long service and bravery awards from R2 000 to R5 000Donations tax casual from R5 000 to R10 000Donations individuals from R25 000 to R30 000Estate duty from R1m to R1.5mBursaries and scholarshipsMedical - eliminate R1 000 thresholdImmediate expensing of intellectual property from R3 000 to R5 000
MONETARY THRESHOLDS
New legislationIT system changesTax returns will have to be changedNew procedures and changes to exiting proceduresAdditional cost to implement proposalsIMPLICATIONS OF TAX PROPOSALS
FURTHER INITIATIVES AND INVESTIGATIONS 2002/03
Siyakha programme and technology improvement programme to address inadequate and outdated systems and technology to provide a better quality service to all taxpayersUIF contributions LegislationAligned with other payroll taxes, i.e. PAYE and SDL Implementation programme Target date - 1 April 2002
SARSS SPECIAL INITIATIVES
Retirement funding The taxation of derivative financial instruments and financial leasesThe introduction of more frequent provisional tax payments Process of rewriting the Income Tax ActSITE systemApplication of penalty provisionsTax returns and number of returns to be submittedPublic Benefit Activity lists
INVESTIGATIONS
Appointment to Chair of the Council of the World Customs Organisation reflects SARS as a reliable partner in trade administration.Coming year will be dedicated to building the division, improving service delivery and management systems and upgrading the physical infrastructure. Improved training and re-organising the new management and staff into high performing teams.Effective measures against illicit trade as well as cross-border trafficking in prohibited substances and trade in endangered species.Rules - implementationCUSTOMS
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