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South Africa Looking For New Tax Revenue Streams

by Lorys Charalambous, Tax-News.com, Cyprus

22 October 2015


South Africa is considering how to increase tax revenues based on reports issued by the Davis Tax Committee on the taxation of small businesses, value-added tax, base erosion and profit shifting, estate duty, and mining taxation.

The announcement comes in South Africa's Medium Term Budget Policy Statement, which was tabled by the Minister for Finance Nhlanhla Musa Nene on October 21. He said gross tax revenue collections are now expected to be ZAR7.6bn (USD566m) lower than earlier projections this year, and ZAR35bn lower over the next three fiscal years.

According to the statement, "Proposals for additional taxes will be approached with caution, given the weak economic outlook. Over the medium term, government will continue to explore reforms that promote an efficient and progressive tax system, taking into account the recommendations of the Davis Tax Committee."

The 2015/16 Budget, presented in February this year, had relied on increases in individual income tax rates for those on higher incomes, and rises in the general fuel levy and excise duties on alcoholic beverages and tobacco products, to sustain tax revenues.

The statement said: "Concerns about BEPS, in particular the misuse of transfer pricing, remain topical globally and in South Africa. Initiatives are underway to comprehensively deal with leakages in corporate income tax."

The MTBPS also confirmed that, "to date, no decisions have been made, … [but] an increase in the VAT rate remains one of the options available over the medium term to finance key elements of the National Development Plan."

"While VAT might be perceived as regressive, comparative studies show that South Africa's overall fiscal system (tax and public expenditure) is strongly redistributive," it added. "Receipts generated from VAT – the second-largest source of tax revenue – are an important part of the resources that fund progressive public expenditure programs."

Reference was also made to the carbon tax that is now expected to be introduced next year. Finally, Nene said that he has "asked for further advice on wealth taxes."

TAGS: inheritance tax | South Africa | tax | business | value added tax (VAT) | fiscal policy | corporation tax | transfer pricing | tax rates | carbon tax | individual income tax | Africa | Tax | BEPS

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