2015 tax proposals and draft rates and monetary...
TRANSCRIPT
2015 TAX PROPOSALS and DRAFT RATES AND MONETARY AMOUNTS BILL
Standing Committee on Finance
Presenters: National Treasury – Ismail Momoniat, Cecil Morden, Yanga Mputa | 26 May 2015
Contents
1. Overview
2. Tax revenue trends
3. Major tax proposals - overview
4. Rates and Monetary Amounts Bill
a. Personal income tax tables
b. Medical tax credits
c. Turnover tax regime
d. Transfer duties
e. Specific excise duties
i. Alcohol taxes
ii. Tobacco taxes
5. Fuel taxes - by amending the Schedules to the Customs and Excise Act
6. UIF proposal
2
Tax Process
• Tax cycle process starts with 2015 Budget announcements
• Major proposals in Chap 4 of Budget Review, more tech proposals
Annexure C
• Treasury prepares tax legislation
– Rates and Monetary Amounts Bill, which only deals with rates and
thresholds (meant to be passes as soon as possible)
– Tax Laws Amendment Bills, which deal with more complex issues,
base changes etc
• This year Rates and Monetary Amounts Bill published on Budget Day
• TLAB will be published in June/July, as involves initial consultations and
research after making mkt-sensitive announcements
• This is the first opportunity to talk about the tax proposals in the Budget
– Perhaps we need a more dedicated tax session immediately after the
Budget
3
Revenue Sources for Government
• All governments raise revenue from taxes (sometimes also referred to as levies
and duties) and from user changes / fees
– Taxes / levies / duties are compulsory unrequited imposts. No direct liked
between the impost and the benefits received – although there indirect
benefits.
– User charges are more directly linked to services – e.g. fees for usage of
electricity, water, passports, driver’s license
• User charges may not always covers all the costs, if partly subsidised.
• Taxes (including duties & levies) the most significant source of revenue. – Gross tax revenue = R98.,3 billion, (98%) in 2014/15
– Non tax revenues (e.g. fees, interest income, mineral royalties ,etc.) = R15.7illion (2%)
– Of which transferred to BLNS / SACU countries = R51.7 billion (5%)
– In addition, SOEs raise revenue from user charges (eg electricity, GFIP) and transfers/subsidies
• All spending should be appropriated through the normal Budget Process. Provide
for more transparency and accountability.
• Only some tax revenues are earmarked – e.g. RAF, UIF, Skills Dev. Levy,
compensation Fund – each of these earmarked funds have their own challenges.
Amounts not included above
4
ACCOUNTABILITY FOR REVENUE
COLLECTED
• S213 of Constitution requires every cent collected by national govt to be
accounted for
– First accountability is to ensure all money received must be paid into
National Revenue Fund unless reasonably exempted by an Act of
Parliament
– Second accountability is for the Auditor-General to check in financial
statements of all accounts that such funds receive are accounted for
– Third accountability is when spending occurs, and when Auditor-
General audits departments and entities financial statements
• All spending is appropriated through the normal Budget Process, or
noted if it is a direct charges.
• Constitution and PFMA provides for full transparency and accountability.
• Only some tax revenues are earmarked – e.g. RAF, UIF, Skills Dev.
Levy, compensation Fund – each of these earmarked funds have their
own challenges. Amounts not included in previous slide
5
Tax revenues performance – 2014/15 lower than 2014 Budget – higher than 2015 Budget - slower economic growth
6
Tax Revenue Estimates for
2014/15 (R million)
2014 Budget
Review 2014 MTBPS
2014 MTBPS
vs. 2014
Budget
2015 Budget
Review
2015 Budget vs.
2014 Budget
Actual
2014/15
Actual vs.
2015
Budget
1. Persons / individuals 335,944 341,500 5,556 350,000 14,056 352,950 2,950
2. Companies 198,935 192,250 -6,685 183,000 -15,935 184,924 1,924
3. Value-added tax 267,160 262,700 -4,460 260,600 -6,560 261,260 660
4. Secondary Tax on
Companies / 19,250 19,800 550 21,400 2,150 21,247 -153
5. Specific excise duties 31,080 32,530 1,450 32,000 920 32,331 331
5. Fuel Levy 51,007 49,864 -1,143 48,200 -2,807 48,467 267
6. Custom / import duties 50,300 45,000 -5,300 39,900 -10,400 40,474 574
7. Other1 39,974 39,966 -8 43,900 3,926 44,630 730
Total tax revenue 993,650 983,610 -10,040 979,000 -14,650 986,283 7,283
Non-tax revenue 18,019 16,785 -1,235 18,064 45 15,741 -2,323
Less SACU -51,738 -51,738 0 -51,738 0 -51,738 0
Total budget revenue 959,932 948,657 -11,275 945,327 -14,605 950,286 4,959
1:Includes - transfer duty, STT, estate duty, and other indirect taxes
Nominal YoY growth in tax revenues
7
18.8%
-4.2%
9.6%
-10%
-5%
0%
5%
10%
15%
20%
19
95
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/13
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/14
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14
/15
An
nu
al p
erc
en
tage
ch
ange
Fiscal year
Percentage change in gross tax revenues
Direct and indirect taxes
8
64.04%
58.97%
35.96%
40.35%
30%
35%
40%
45%
50%
55%
60%
65%
70%
19
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/95
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/96
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/97
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/00
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/15
Pe
rce
nta
ge o
f to
tal t
ax r
eve
nu
es
Fiscal year
Direct vs indirect taxes as a proportion of total revenues
Direct taxes
Indirect taxes
PIT, VAT and CIT accounts for more than 80% of total tax revenues
9
Tax revenue by instrument as a % of National Budget Revenue
2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15
Individuals 30.15% 32.05% 35.39% 33.74% 33.83% 35.01% 35.39% 37.15%
VAT 26.88% 25.35% 25.52% 27.29% 25.81% 27.29% 27.14% 27.48%
Companies 25.03% 27.16% 23.27% 19.76% 20.49% 20.21% 20.25% 19.53%
Fuel levy 4.24% 4.09% 4.97% 5.12% 4.95% 5.13% 4.99% 5.10%
Specific excise 3.25% 3.32% 3.67% 3.41% 3.43% 3.60% 3.32% 3.41%
Customs duties 4.73% 3.74% 3.38% 3.96% 4.62% 4.95% 5.05% 4.27%
STC / Dividends 3.68% 3.29% 2.67% 2.55% 2.97% 2.51% 1.98% 2.23%
Sub Total 97.96% 98.99% 98.87% 95.83% 96.10% 98.70% 98.11% 99.16%
Three (PIT, VAT, CIT) 82.06% 84.57% 84.18% 80.78% 80.13% 82.52% 82.78% 84.16%
PIT, VAT & CIT as a % of total tax reveneus
10
42.7%
37.1%
27.5%
10.4%
2008/09, 27.2%
19.5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
19
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/95
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/96
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/99
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/00
20
00
/01
20
01
/02
20
02
/03
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03
/04
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/05
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05
/06
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06
/07
20
07
/08
20
08
/09
20
09
/10
20
10
/11
20
11
/12
20
12
/13
20
13
/14
20
14
/15
Tax
to G
DP
rat
io
Fiscal year
Tax as a proportion of National Budget Revenue for top three taxes
Personal income tax
Value added tax
Corporate income tax
The tax to GDP ratio
11
Tax revenue by instrument as a % of Gross Domestic Product
2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15
Individuals 7.77% 8.10% 8.04% 8.03% 8.13% 8.29% 8.58% 9.12%
VAT 6.93% 6.41% 5.80% 6.50% 6.20% 6.46% 6.58% 6.74%
Companies 6.45% 6.87% 5.29% 4.70% 4.92% 4.79% 4.91% 4.79%
Fuel levy 1.09% 1.03% 1.13% 1.22% 1.19% 1.21% 1.21% 1.25%
Specific excise 0.84% 0.84% 0.83% 0.81% 0.82% 0.85% 0.80% 0.84%
Customs duties 1.22% 0.94% 0.77% 0.94% 1.11% 1.17% 1.22% 1.05%
STC / Dividends 0.95% 0.83% 0.61% 0.61% 0.71% 0.59% 0.48% 0.55%
Sub Total 25.26% 25.02% 22.46% 22.81% 23.09% 23.37% 23.80% 24.33%
Three (PIT, VAT, CIT) 21.16% 21.37% 19.13% 19.23% 19.25% 19.54% 20.08% 20.65%
Tax / GDP 26.38% 25.95% 23.47% 23.86% 24.11% 24.46% 24.93% 25.47%
Budget Revenue / GDP 25.78% 25.28% 22.72% 23.80% 24.02% 23.68% 24.25% 24.54%
Tax / GDP still below the peak of 2007/08
12
21.9%
26.4%
25.5%
20%
21%
22%
23%
24%
25%
26%
27%
19
94
/95
19
95
/96
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96
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97
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19
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19
99
/00
20
00
/01
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02
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03
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07
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09
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12
/13
20
13
/14
20
14
/15
Tax
to G
DP
rat
io
Fiscal year
Gross tax revenues / GDP (excluding RAF and UIF)
The tax to GDP ratio is high compared to most African countries
13
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Tax to GDP ratio: African countries
But relatively at the low end compared to OECD countries
14
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Tax to GDP ratio: OECD countries
Budget 2015 – Tax policy objectives
• An efficient and progressive tax system is a cornerstone of South Africa’s
democracy, supporting the values of social solidarity as reflected in the
Constitution.
• Tax revenues enable government to, supply public services, redistribute
wealth and increase domestic investment.
• Accordingly, the tax system needs to be fair, transparent, efficient and
sufficiently flexible to adjust to changes in economic activity
15
Transparency, Accountability and
taxpayer morality
• Taxes implies a social contract between taxpayers and the government
• This requires that all tax revenues are productively spend and all funds are
appropriately accounted for
• There are various checks and balances and institutions that were established or
created to ensure transparency and accountability
• As a country our Budget documentation score very high on transparency – so the
process of imposing taxes, revenue collections and the allocations / appropriation
of revenues are very transparent.
• Parliament has the responsibility and authority to approve all tax measures and
the appropriation of revenue
• In addition Parliament must hold all government departments and gov. entities
accountable for funds allocated to them. The role AG and the Public Protector is
also critical in this regard.
• Transparency and accountability are critical to ensure and maintain tax morality –
it tax morality suffers the viability of the sovereign State will become
questionable.
16
Major tax policy proposals – Budget 2015
17
The 2015 Budget includes two revenue raising measures to ensure the sustainability of the
public finances. The two are a modest increase in the marginal personal income tax rates
and increases in the fuel levies.
• The marginal personal income tax rates will be increased by one percentage point for all taxpayers
earning more than R181 900, and adjusting tax brackets and rebates to account for fiscal drag • The lowest income tax bracket will remain at 18 per cent
• The brackets and rebates will increase by 4.2 per cent – fiscal drag relief.
• These changes combined will increase the progressivity of the income tax system, with those earning less than
around R450 000 paying less personal income tax, while those on higher income levels will pay more.
• Raising the general fuel levy by 30.5 c/litre and the Road Accident Fund levy on fuel by 50 c/litre
(a total increase of 80.5 c/litre. • The steep decline the price of petrol has created space to increase the fuel levies without adversely impacting
the economy
• Other major tax proposals include:
• Measures to counter base erosion and profit shifting (BEPS) by improving documentation and
reporting requirements relating to Transfer Pricing.
• Providing for a more generous turnover tax regime for micro businesses
• Amendments to the transfer duties:
• Transfer duty eliminated for houses that
are below R750 000
• Increase in transfer duty for houses above
R2.3 million
• Increases in excise duties on alcoholic
beverages and tobacco products
• Increases in medical tax credits
• A more generous tax incentive for energy
efficiency savings: from 45 c/kWh to
95 c/kWh
• Under consideration is an increase in the
electricity levy by 2c /kWh to 5.5 c/kWh.
This will help to manage the demand for
electricity, especially by energy intensive
users.
18
Additional tax policy proposals – Budget 2015
• Introduction of a tyre levy, to replace the
current tyre fee collection procedure
• Review the requirements of the
accelerated depreciation regime for
hydropower electricity generation
• Closing a loophole to protect the estate
duty tax base
• Refinement to the tax regime for unlisted
real estate investment trusts and hedge
funds
• Further developments on the carbon tax
.
Additional tax policy proposals – (2)
• Securities Lending Arrangements-Outright transfer of collateral
– Currently, the transfer of collateral in a securities lending arrangement results in
securities transfer tax and capital gains tax.
– These taxation consequences of the collateral transfer may negatively affect liquidity
and South Africa’s attractiveness as an investment destination.
– The tax treatment of the transfer in beneficial ownership of the collateral is reviewed to
reduce any negative effects on acceptable business practices.
–
• Transitional tax issues resulting from the regulation of hedge funds
– With effect from 1 April 2015, Government declared certain hedge funds as collective
investment schemes subject to regulation by FSB in terms of CIS Act.
– The restructuring of the regulated hedge funds has unintended transitional tax
consequences.
– In order to allow for the effective regulation of the hedge funds, the transitional tax
measures will considered.
19
Additional tax policy proposals – (3)
• Capital Gains Tax on cross issue of shares
– With effect from 1 April 2014, changes were made in the Income Tax Act to counter
base erosion of the South African tax base and profit shifting.
– As a result of these changes, if a South African resident company issues shares as a
consideration for its acquisition of shares in a foreign company, it will result in a capital
gain for the South African resident company.
– There has been a public outcry that these anti-avoidance are too broad and also affect
bona-fide commercial transactions even in instances where there is no element of
base erosion and profit shifting.
– It is proposed that these provisions be relaxed, without losing the sight of initial policy
intent, which is to counter base erosion and profit shifting through untaxed corporate
migrations from South Africa.
20
21
The Rates and Monetary Amounts Bill
Key revenue raising options in the 2015 Budget
• The 2014 Medium Term Budget Statement indicated that a structural increase in tax revenues was required to safeguard the public finances and ensure the fiscal framework is sustainable
• The two instruments that were adjusted to fulfil the revenue raising requirement were personal income taxes and fuel levies
• Personal Income tax Adjustments:
– Al the taxable income brackets and rebates were increased to counter the impact of inflation (fiscal drag) and to minimise the impact on those with lower incomes
– The marginal tax rates were increased by 1 percentage point for incomes above R181 900
22
23
PIT: Brackets increased by 4.2%, rates increased by 1 p.p. (except for bottom bracket)
24
Relief for those with lower incomes, additional taxes for those on incomes above around R500 000
Adjustments to personal income tax brackets and
rebates since 1998
• The fairness (vertical equity) and progressivity of the personal income tax
system is also dependent on how the income tax brackets are adjusted
to take account of inflation as wages and salaries increases over time.
• In the context of a progressive personal income tax system such as ours
(with six income tax brackets) and in an inflationary environment
individuals are faced with higher tax liabilities if wages and salaries are
increased to account for inflation (cost of living adjustments) but the
personal income tax brackets are not.
• Since 2000 all the personal income tax brackets and rebates were
increased for inflation. In some years the these thresholds and rebates
were increases above inflation and since 2013 be slightly less than
inflation.
• This policy stance has provided real income tax relief for all taxpayers,
with most of the relief to lower and middle income earners. (taxable
income below R350 000 per annum at 2014 prices).
25
PIT reforms between 1998 and 2015
• Between 1998/99 and 2002/03 the marginal rates decreased by between
1 and 9 percentage points : • 1 (bottom) by 1 percentage points from 19% to 18%
• 2 by 5 percentage points from 30% to 25%
• 3 by 9 percentage points from 39% to 30%
• 4 by 8 percentage points from 43% to 35%
• 5 by 6 percentage points from 44% to 38%, and
• 6 (top) by 5 percentage points from 45% to 40%
• The marginal PIT rates was increased by 1% point from the 2nd bracket upwards in
2015 (it is now 18%, 26%, 31%, 36%, 39%, & 41%)
• Between 1998/99 and 2003/04 the bottom income threshold was increased by
17.7 per cent per annum and that of the top income bracket by 16.6 per cent per
annum
• Between 2003/04 and 2014/15 the bottom threshold was increased by 8.3 per cent
per annum and that of the top income bracket by 8.8 per cent per annum.
• The personal income tax free threshold for those below 65 years old was
increased by 8.5 per cent per annum since 1998/99.
26
PIT changes – 1998/99 to 2015/16 (A)
27
Taxable Income
PIT bracket Marginal personal income tax rates for the six brackets
Budget Tax year Bottom Top 1 2 3 4 5 6
1 2015 2015/16 181 900 701 300 18% 26% 31% 36% 39% 41%
2 2014 2014/15 174 550 673 100 18% 25% 30% 35% 38% 40%
3 2013 2013/14 165 600 638 600 18% 25% 30% 35% 38% 40%
4 2012 2012/13 160 000 617 000 18% 25% 30% 35% 38% 40%
5 2011 2011/12 150 000 580 000 18% 25% 30% 35% 38% 40%
6 2010 2010/11 140 000 552 000 18% 25% 30% 35% 38% 40%
7 2009 2009/10 132 000 525 000 18% 25% 30% 35% 38% 40%
8 2008 2008/09 122 000 490 000 18% 25% 30% 35% 38% 40%
9 2007 2007/08 112 500 450 000 18% 25% 30% 35% 38% 40%
10 2006 2006/07 100 000 400 000 18% 25% 30% 35% 38% 40%
11 2005 2005/06 80 000 300 000 18% 25% 30% 35% 38% 40%
12 2004 2004/05 74 000 270 000 18% 25% 30% 35% 38% 40%
13 2003 2003/04 70 000 255 000 18% 25% 30% 35% 38% 40%
14 2002 2002/03 40 000 240 000 18% 25% 30% 35% 38% 40%
15 2001 2001/02 38 000 215 000 18% 26% 32% 37% 40% 42%
16 2000 2000/01 35 000 200 000 18% 26% 32% 37% 40% 42%
17 1999 1999/00 33 000 120 000 19% 30% 35% 40% 44% 45%
18 1998 1998/99 31 000 120 000 19% 30% 39% 43% 44% 45%
PIT changes – 1998/99 to 2015/16 (B)
28
Personal Income Tax Taxable Income Taxable Income
Income tax threshold Rebate PIT relief PIT bracket PIT bracket
Budget Tax year < 65 65 and > 75 and > Primary Secondary Tertiary R billion Bottom Top Bottom Top
Rand Rand % Change % Change
1 2015 2015/16 73 650 114 800 128 500 13 527 7 407 2 466 - 181 900 701 300 4.2% 4.2%
2 2014 2014/15 70 700 110 200 123 350 12 726 7 110 2 367 9.3 174 550 673 100 5.4% 5.4%
3 2013 2013/14 67 111 104 611 117 111 12 080 6 750 2 250 7.0 165 600 638 600 3.5% 3.5%
4 2012 2012/13 63 556 99 056 110 889 11 440 6 390 2 130 9.5 160 000 617 000 6.7% 6.4%
5 2011 2011/12 59 750 93 150 104 261 10 755 6 012 2 000 8.1 150 000 580 000 7.1% 5.1%
6 2010 2010/11 57 000 88 528 10 260 5 675 6.5 140 000 552 000 6.1% 5.1%
7 2009 2009/10 54 200 84 200 9 756 5 400 13.5 132 000 525 000 8.2% 7.1%
8 2008 2008/09 46 000 74 000 8 280 5 040 7.2 122 000 490 000 8.4% 8.9%
9 2007 2007/08 43 000 69 000 7 740 4 680 8.4 112 500 450 000 12.5% 12.5%
10 2006 2006/07 40 000 65 000 7 200 4 500 13.5 100 000 400 000 25.0% 33.3%
11 2005 2005/06 35 000 60 000 6 300 4 500 6.8 80 000 300 000 8.1% 11.1%
12 2004 2004/05 32 222 50 000 5 800 3 200 4.0 74 000 270 000 5.7% 5.9%
13 2003 2003/04 30 000 47 222 5 400 3 100 13.3 70 000 255 000 75.0% 6.3%
14 2002 2002/03 27 000 42 640 4 860 3 000 15.0 40 000 240 000 5.3% 11.6%
15 2001 2001/02 23 000 39 154 4 140 3 000 8.3 38 000 215 000 8.6% 7.5%
16 2000 2000/01 21 111 36 538 3 800 2 900 9.9 35 000 200 000 6.1% 66.7%
17 1999 1999/00 19 526 33 717 3 710 2 775 4.9 33 000 120 000 6.5% 0.0%
18 1998 1998/99 18 500 31 950 3 515 2 660 3.7 31 000 120 000
Personal income tax – average effective tax rate
29
1999, 21%
2003, 17%
2014, 20%
14%
15%
16%
17%
18%
19%
20%
21%
19
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Calendar Years
Personal income tax as a percentage of employee compensation
Personal income tax as a per cent of compensation
PIT as a % of GDP
30
1999/00, 10.0%
2003/04, 7.3%
2014/15 , 9.1%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%
9.5%
10.0%
10.5%
PIT as a % of GDP
31
Medical tax credits, tax rate on Trusts
• Medical tax credits were increased by 5.1%
– From R257 per month for the first two beneficiaries to R270 per month
– And from R172 to R181 per month for each additional beneficiary
• The rate of tax on taxable income for trusts was increased to 41 per cent
– The change aligns the top marginal personal income tax rate with the tax rate on trusts to avoid any arbitrage opportunities
32
Top marginal personal income tax rate is on the upper end compared to African countries
0
10
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60
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Gu
ine
a-B
issa
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o T
om
é a
nd
Prí
nci
pe
Nig
eri
aB
ots
wan
aEg
ypt
Gh
ana
Lib
eria
Bu
rkin
a Fa
soC
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sD
jibo
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Erit
rea
Ke
nya
Mal
awi
Mau
rita
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Rw
and
aSi
err
a Le
on
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nza
nia
Mo
zam
biq
ue
Swaz
ilan
dG
amb
iaA
lger
iaB
uru
nd
iC
amer
oo
nC
ape
Ver
de
Equ
ato
rial
Gu
ine
aEt
hio
pia
Gab
on
Leso
tho
Nig
er
Tun
isia
Nam
ibia
Mo
rocc
oU
gan
da
Gu
ine
aM
ali
Som
alia
Sou
th S
ud
anSe
neg
alSo
uth
Afr
ica
Ivo
ry C
oas
tC
on
go, R
ep
ub
lic o
fB
en
inC
on
go, R
ep
ub
lic o
fTo
goZi
mb
abw
eC
en
tral
Afr
ican
Re
pu
blic
Ch
ad
Top marginal personal income tax rate: African countries
33
In the middle when compared to OECD countries
0
10
20
30
40
50
60
Cze
ch R
epu
blic
Hu
nga
ry
Esto
nia
Slo
vak
Rep
ub
lic
Can
ada
Fin
lan
d
Ice
lan
d
Po
lan
d
New
Zea
lan
d
Me
xico
Ko
rea
Turk
ey
Un
ite
d S
tate
s
Ch
ile
Swit
zerl
and
Jap
an
Sou
th A
fric
a
Ire
lan
d
Gre
ece
Ital
y
Luxe
mb
ou
rg
Au
stra
lia
Fran
ce
Un
ite
d K
ingd
om
Ger
man
y
No
rway
Isra
el
Po
rtu
gal
Au
stri
a
Be
lgiu
m
Slo
ven
ia
Net
her
lan
ds
Spai
n
De
nm
ark
Swed
en
Top marginal personal income tax rate: OECD countries
34
More generous turnover tax regime to support SMME’s
• In line with the recommendations from the Davis Tax Committee, the turnover tax regime (for businesses with annual turnover of less than R1 million) was made more generous
• The taxable turnover at which businesses start to pay tax increases from R150 000 to R335 000
• And the marginal rate of tax that is lower at all levels of taxable turnover, with the top rate decreasing from 6 per cent to 3 per cent
35
Increases in excise duties for alcohol and tobacco
• The value of excise duties on alcohol and tobacco is based on a targeted tax burden, which is expressed as a percentage of the weighted average retail selling price
• Until now the targeted tax burden for wine, beers and spirits were 23, 35 and 48 per cent respectively (Excise Duty + VAT)
• The targeted total consumption tax burden for tobacco is 52 per cent of the retail selling price of the most popular brand within each tobacco product category
• To remain in line with these targeted tax burdens the excise duties increased by between 4.8 per cent and 8.5 per cent for alcohol and between 5 and 7 per cent for tobacco products
• From next year, the calculations will exclude value added tax, hence the targeted excise duty only burdens will be 11, 23 and 36 per cent for wine, beer and spirits and 40 per cent for tobacco respectively
36
Alcohol and tobacco excise duties
37
Structure of transfer duties changed to improve progressivity
• Transfer duties were adjusted to provide relief to middle-income households, while increasing transfer duties for more expensive properties
• All properties that are acquired with a value less than R750 000 will not pay transfer duty, while the effective transfer-duty liability for properties purchased with a value greater than R2.3 million will increase
Fuel taxes increased, but not in the Rates Bill
• Changes to the fuel levies incorporated in the Customs and Excise Act
• Increases in the fuel levies were the second main revenue raising measure to ensure the sustainability of the public finances
• The general fuel levy was increased by 30.5c per litre, increasing the tax as a percentage of the pump price from around 28 per cent to around 41 per cent (for 93 petrol)
• There was also a 50c per litre increase in the Road Accident Fund levy
• The effective date for both levies was 1 April 2014.
38
Fuel tax table
39
Fuel levy was flat in real terms up to 2008, then increased thereafter
40
0
50
100
150
200
250
300
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Fue
l le
vy (
cen
ts p
er
litre
)
Fiscal year
Fuel levy in c/litre for petrol (real and nominal terms)
Fuel levy - petrol (Nominal)
Fuel levy - petrol (Real: 2008 as base year)
General fuel levy revenues
41
0
10 000
20 000
30 000
40 000
50 000
60 000
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
Fue
l le
vy r
eve
nu
es
(R m
illio
n)
Fiscal year
Fuel levy revenues (real and nominal terms)
Revenue - Nominal Revenue - Real
Fuel levy revenues have been decreasing as a share of tax and GDP
42
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
1.8%
2.0%
0%
1%
2%
3%
4%
5%
6%
7%
8%
19
94
/95
19
95
/96
19
96
/97
19
97
/98
19
98
/99
19
99
/00
20
00
/01
20
01
/02
20
02
/03
20
03
/04
20
04
/05
20
05
/06
20
06
/07
20
07
/08
20
08
/09
20
09
/10
20
10
/11
20
11
/12
20
12
/13
20
13
/14
20
14
/15
Fue
l le
vy r
eve
nu
es
(R m
illio
n)
Fiscal year
Fuel levy revenue as percentage of tax revenues (LHS) and GDP (RHS)
Fuel levy as % of total revenues (LHS)
Fuel levy as % of GDP (RHS)
Fuel (Petrol & Diesel) usage – fuel efficiency
43
3.77
4.38
8.15
2
3
4
5
6
7
8
9
10Litres of Fuel / R' 000 GVA
Litres P / R'000 GVA
Litres D / R'000 GVA
Litres Total / R'000 GVA
Petrol & Diesel Sales
44
Petrol Diesel Total Petrol Diesel Total
Million Litres % % %
2014 11 344 13 168 24 512 46% 54% 100%
2013 11 153 11 890 23 043 48% 52% 100%
2012 11 714 11 262 22 976 51% 49% 100%
2011 11 963 11 225 23 188 52% 48% 100%
2010 11 455 10 170 21 625 53% 47% 100%
2009 11 313 9 116 20 429 55% 45% 100%
2008 11 077 10 071 21 148 52% 48% 100%
2007 11 558 9 757 21 315 54% 46% 100%
2006 11 279 8 708 19 987 56% 44% 100%
2005 11 165 8 115 19 280 58% 42% 100%
2000 10 396 6 254 16 650 62% 38% 100%
1995 10 153 5 432 15 585 65% 35% 100%
1994 9 629 5 110 14 739 65% 35% 100%
1990 8 633 5 280 13 913 62% 38% 100%
1985 6 561 5 062 11 623 56% 44% 100%
1980 3 945 3 391 7 336 54% 46% 100%
Taxes on Petrol : Q3 2014, Source: IEA
45
44.9% 43.0%
39.8%
25.3%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Taxes on Petrol as % of Pirce: Q3 2014
Fuel tax GST / VAT
Petrol pump prices – Dec 2014: US$
46
Retail pump price - Petrol December 2014:
US$ Unleaded*
Country Price incl. Taxes
Indonesia 0.95
Nigeria 0.60
UK 1.94
Norway 2.45
Turkey 2.23
Australia 1.35
South Africa 1.23
China 1.24
Brazil 1.45
India 1.14
Argentina 1.55
Zambia 1.60
Malawi 1.88
Source: Bloomberg / Associates for International
Research Inc. (AIRINC) /Europes Energy Portal
(1 December 2014)
Some facts about the general fuel levy
• As in most other jurisdictions revenue from the general fuel levy – as with
most other tax revenues goes into the National Revenue Fund – it is not
earmarked
• We spend more on roads and public transport than we raise from the fuel
general fuel levy (All three spheres of government collectively)
• Fuel revenue not very buoyant, so limited scope to raise new revenue
even if we were to increase more
• Fuel sales increasing at a rate below the increase in the growth in GDP –
a good sign – indicating the economy is becoming more fuel efficient.
• Fuel taxes collected as the point of production and / or importation (Duty
at source) not the point of sale
• Collecting fuel taxes at the point of sale much more complex and can be
avoided - also higher administrative costs
47
Encouraging South Africans to pay for their
commitments like GFIP and electricity
• Not paying for services leads to higher charges for those who pay
• Whatever the details of how debt acquired, we have to pay the debt that we are
contractually committed to (as was done in 1994)
– If SANRAL does not pay its debts, our ratings will be downgraded, and the
cost of borrowing will go up for national govt, ESKOM, municipalities, and for
all borrowers from SA banks
– So we will all pay higher bank charges, higher electricity costs, etc.
– Why would anyone want to destroy our payment credibility and impose higher
costs on future generations?
• Co-benefits of urban tolling – reduce congestions, encourage use of public
transport and / or lift clubs, reduce pollution, reduced accidents
• Even if fuel tax is earmarked for GFIP, we have to raise the fuel levy or PIT to
deal with the gap resulting in the National Revenue Fund
– this also means other provinces or non-users have to pay more, and actual
users pay less
– Also assumes an increase in fuel levy will always increase revenue
48
Electricity levy - proposed 2 c/kWh increase
• The proposed increase in the electricity levy was intended to help, as
one of a range of demand side management tools, deal with some of the
current challenges in the electricity sector.
• Both electricity proposals were not incorporated into revenue for the
fiscal framework, as they are meant to be considered by the war-room
• Given that some components of the electricity levy could be viewed as a
proxy carbon tax it was also stated in the 2105 Budget Review that the
additional 2 c/kWh will be reversed when the carbon tax commenced
during the second half of 2016.
• In the light of Eskom’s very late application for an additional 10 per cent
increase in the electricity tariff and Nersa’s decision to consider Eskom’s
application only by the end of June 2015 the National Treasury is
reviewing the impact of he proposed additional 2 c/kWh.
49
Electricity levy – intensive users
• With regards to possible loopholes that could potentially have unduly
favoured some electricity intensive users the National Treasury has met
with such users and was provided with evidence that despite long-term
pricing agreements they are paying the full electricity levy.
• Thus any possible loophole that might have existed due to such long
term pricing agreements has been address by such users “voluntary”
paying the electricity levy.
• The National Treasury applauds this commitment to abide with the policy
intent of the levy and will therefore not proceed with the special electricity
levy to ensure that electricity produced from non-renewable sources and
nuclear and all electricity users are subject to the electricity levy, as was
the intention. The proposal for the special levy is therefore no longer
necessary at this stage. However, should circumstances changes in
future we might have to reconsider our options.
50
UIF – proposal (1)
• In the 2015 Budget, the Minister proposed to reduce the remuneration
threshold against which contributions to the UIF are calculated from the
current monthly amount of R14 872 to R1 000, for a period of one year.
• The UIF currently has an accumulated surplus of more than R72 billion,
which is well in excess of annual expenditure on benefits. The UIF
proposal was also intended to reduce the rate of accumulation of this
surplus.
• During the consultations the following concerns were raised:
a) the need to implement the UIF Amendments Bill tabled in 2014, to
extend benefits to workers who contribute towards the Fund;
b) the need to speed up engagement over the broader social security
reform process
51
UIF – proposal (2)
• The Minister of Finance has decided not to proceed with the
implementation of the proposal to reduce the remuneration threshold
against which contributions to the Unemployment Insurance Fund (UIF)
are calculated. This decision was taken after detailed engagements with
the labour and business constituencies at National Economic
Development and Labour Council (NEDLAC).
• The UIF Budget proposal will therefore not be implemented in the
2015/16 fiscal year, to allow more time for consultation at NEDLAC and
with other interested stakeholders. The consultations will focus on:
– implementation of the agreed UIF Amendments Bill to extend benefits
to workers who contribute towards the Fund;
– review of earmarked taxes (UIF, RAF, skills levy) to address fiscal
imbalances that have emerged, whether in the form of surpluses and
or deficits.
52
Key Challenge is on Earmarked Taxes
and fiscal imbalance
• Page 4 of Budget Review highlighted the problem several imbalances
that have emerged in the fiscal system
• RAF existing liability is R98.5 bn
• UIF surplus is R72.3 bn
• SETA and National Skills Fund
• We have had some discussions in NEDLAC on UIF and the general
challenge of surplus and deficits
• SCOF needs to lead on this process
53
CIT: Headline tax rates – SA vs. OECD
countries, 2014 (note effective tax rates are lower)
54
28
0
5
10
15
20
25
30
35
40
Ire
lan
d
Can
ada
Ger
man
y
Slo
ven
ia
Po
lan
d
Cze
ch R
epu
blic
Hu
nga
ry
Fin
lan
d
Turk
ey
Ch
ile
Ice
lan
d
Luxe
mb
ou
rg
Esto
nia
Un
ite
d K
ingd
om
Swed
en
Slo
vak
Rep
ub
lic
Po
rtu
gal
Swit
zerl
and
De
nm
ark
Net
her
lan
ds
Au
stri
a
Jap
an
Gre
ece
Isra
el
No
rway
Ital
y
Sou
th A
fric
a
New
Zea
lan
d
Me
xico
Spai
n
Au
stra
lia
Be
lgiu
m
Fran
ce
Ko
rea
Un
ite
d S
tate
s
CIT Headline Tax Rates - SA vs. OECD countries
CIT: Headline tax rates – SA vs. other African
countries, 2014 (note effective tax rates are lower)
55
28
0
10
20
30
40
50
60
Mau
riti
us
Lib
yaM
adag
asca
rZi
mb
abw
eV
ietn
amB
ots
wan
aG
uin
ea-
Bis
sau
Alg
eria
Egyp
tSã
o T
om
é a
nd
Prí
nci
pe
Gh
ana
Cap
e V
erd
eD
jibo
uti
Lib
eria
Mau
rita
nia
Leso
tho
Togo
Bu
rkin
a Fa
soSw
azila
nd
Ivo
ry C
oas
tSo
uth
Su
dan
Sou
th A
fric
aN
ige
ria
Ce
ntr
al A
fric
an R
ep
ub
licSi
err
a Le
on
eG
abo
nEt
hio
pia
Uga
nd
aR
wan
da
Tan
zan
iaN
ige
rB
en
inM
alaw
iSe
neg
alK
en
yaTu
nis
iaSo
mal
iaEr
itre
aG
amb
iaM
oza
mb
iqu
eSe
ych
elle
sC
on
go, R
ep
ub
lic o
fC
on
go, R
ep
ub
lic o
fN
amib
iaEq
uat
ori
al G
uin
ea
An
gola
Sud
anB
uru
nd
iM
ali
Gu
ine
aC
amer
oo
nC
had
Co
mo
ros
CIT Headline Tax Rates : SA vs. other African countries
Estimated average effective corporate income
tax rate (NOS = Net Operating Surplus)
56
2008, 20.9%
16.9%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
CIT revenue as a % NOS
Corporate income tax rate & revenue
2008/09, 28.0%
1999/00, 2.4%
2008/09, 6.9%
4.8%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%19
83/8
4
19
84/8
5
19
85/8
6
19
86/8
7
19
87/8
8
19
88/8
9
19
89/9
0
19
90/9
1
19
91/9
2
19
92/9
3
19
93/9
4
19
94/9
5
19
95/9
6
19
96/9
7
19
97/9
8
19
98/9
9
19
99/0
0
20
00/0
1
20
01/0
2
20
02/0
3
20
03/0
4
20
04/0
5
20
05/0
6
20
06/0
7
20
07/0
8
20
08/0
9
20
09/1
0
20
10/1
1
20
11/1
2
20
12/1
3
20
13/1
4
20
14/1
5
Headline CIT rate (lhs) & CIT revenue as a % of GDP (rhs)
CIT Rate CIT Rev. % GDP
Allocations - Department of Transport
58
R'000 2012/13 2013/14 2014/15
1 Departmental baseline 23,021,852 28,418,447 29,725,696
SANRAL: National Road Agency: Capital 6,394,541 7,515,300 7,849,560
SANRAL: National Road Agency: Coal haulage 648,910 665,498 696,111
PRASA: Passenger Rail Agency of SA 7,481,110 10,710,959 13,865,547
Compensation of employees 381,322 405,748 430,101
Other 8,115,969 9,120,942 6,884,377
2 Conditional Grant to Local Government 5,589,135 5,912,264 6,184,228
Public Transport: Infrastrcuture & Network
Operations
3 Conditional Grant to Provincial Government 13,093,000 13,735,539 14,367,374
Provincial Road Maintenance 8,540,479 8,952,830 9,364,661
Public Transport Operation 4,552,521 4,782,709 5,002,713
4 Net additions (e.g. PRASA) 571,313 156,960 3,100,381
5 TOTAL 42,275,300 48,223,210 53,377,679
Transport - National - Budget Allocations