SAIT Comments on the Draft TLAB and TALAB 2014

Presenters: Mr Job KabochiMr Lesedi SeforoMr Erich Bell

Introduction

Largest tax association in SA – more than 11 000 members ‘specialising’ in taxation.

Comprehensive written submission developed by SAIT technical department, our members and 5 specialist committees.

Submission ScoF focused on technical matters. Policy and other considerations require further review in relation to

impact on economy, social challenges and National Development Plan.

Termination of Agricultural Zero-rate

Revenue collection vs. cash-flow impact for small farmers

Our views

Proposal be deleted in favor of stronger enforcement

Retain ZAR 1.5m threshold test for qualifying farmers

‘Category D’ registration be amended allow earlier VAT refunds 

Import VAT Timing

Proof of payment = customs receipt; clarity welcome

Our concerns

Delayed input tax credits = adverse cash-flow

Financial vs VAT accounting disparity

In our view risk to fiscus mitigated by:

SARS’s clearing agent vetting process

Agents’ guarantees paid to SARS

VAT credits be allowed if payment made by return filing date

Electronic Services Enterprise

Multiple-proxy test welcome

Clarity required:

• Origination of payment from South African bank

• Invoice delivery address - physical vs electronic address

• Future consideration - B2C vs B2B

Relevant Material

Current definitionAny information, document or thing that is foreseeably relevant for the administration of a tax Act…

What is the administration of a tax Act?It basically means anything that may affect the amount of tax that a person owes SARS

Proposed definitionAny information, document or thing that in the opinion of SARS is foreseeably relevant for the administration of a tax Act…

Why the change?

Change to the definition

Concerns

It has been left to SARS’ discretion to determine what is relevantNo obligation on SARS to explain how the material is relevant.No mechanisms available for the taxpayer to object.

Small business corporations

Current incentives Accelerated write offs (manufacturing assets in full in YOA

brought into use whilst for non-manufacturing assets election between a 50/30/20 or section 11(e) allowance.

Taxed according to a sliding scale:

Taxable income Rate of taxNot exceeding R67 111 0 per cent of taxable income

Exceeding R67 111 but not exceeding R365 000

7 per cent of taxable income that exceeds R67 111

Exceeding R365 000 but not exceeding R550 000

R20 852 plus 21 per cent of amount by which taxable income exceeds R365 000

Exceeding R550 000 R59 702 plus 28 per cent of amount by which taxable income exceeds R550 000

Small business corporations (continued)

Proposed changes Small business corporations to be taxed in the same manner

as all other companies (28 per cent tax rate from the first Rand).

If tax compliant in terms of tax returns and liabilities, the small business corporation would receive a refundable compliance rebate of R15 000 per YOA.

Nothing mentioned in TLAB 2014 about the accelerated write off clauses.

Concerns regarding proposed changes Internal compliance costs for a small business entity is over

R60 000 per year of assessment. The only small business corporations that stand to benefit is

small business corporations with a taxable income of below R53 574 (a SBC with a taxable income of R550 000 stands to loose R79 298 in taxes should the proposal be implemented).

Small business corporations (continued)

Conclusion

It is proposed that incentive be provided according to a sliding scale starting at R15 000 and moving up to the range of R 100 000 for your larger small business corporations.

Currently incentive is aimed at incentivising micro type of enterprises at the cost of flourishing small businesses.

Thank You