South African Taxpayers Hope For Easy Ride Over Budget

by Robert Lee, Tax-News.com, London

12 February 2003

Following several years of substantial changes to the country's tax code, South African businesses and individuals are doubtless hoping for an easy ride when Finance Minister, Trevor Manuel unveils his annual budget on February 26.

It emerged earlier this month that government revenues are expected to exceed the budget by between R15 billion and R21 billion by the end of the financial year, an announcement which has raised tax cut hopes. According to tax consultancy firm Deloitte & Touche, the marginal tax rate may not be reduced, but 'tax brackets might be adjusted to reduce the tax burden on middle- to lower-income earners.'

The Business Report national news service quoted Deloitte & Touche as observing that the Finance Minister is unlikely to adjust company car allowances and medical aid contribution relief for employees, as both of those material fringe benefits are considered beneficial to the country's economy. Estate duty and donations tax legislation are also expected to remain untouched in Mr Manuel's forthcoming budget.

However, the tax consultancy firm suggested that the taxation of retirement funds is likely to come under scrutiny:

'It appears that the taxation of the whole industry will be reviewed, both from the side of the investment houses providing retirement products and the taxation of retirement money when it is released from the fund on and after retirement,' it announced on Monday, continuing:

'It is highly likely that with the bulk of the new legislation already drafted and promulgated, SARS now has resources to allocate to the retirement fund project, and the minister will outline how this will progress.'

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