2012 Budget Speech Wish List
Christo Theron, Director at BDO; Marty Santana, Director at BDO; David Warneke, Tax Director at BDO and Shohana Mohan, Director at BDO
- Statistics consistently show that the average South African has a large appetite for credit and we would like to see more meaningful tax incentives for savings. As part of this incentive we would like to see a significant reduction in the taxation of retirement lump sum benefits.
- Given the enormous need to uplift poorer communities, we would like to see the limit for tax deductible donations to PBOs involved in such activities increased from 10 per cent of taxable income to 20 percent.
- There are huge differences between the corporate restructuring rules in terms of the Income Tax Act and the Companies Act. We would like to see these more closely aligned.
- The Income Tax Act does not cater for allowances in respect of expenditure incurred in the acquisition of corporate websites. Expenditure to upgrade or maintain such websites also does not appear to meet the requirements for deductibility under section 11(d) or S11(a) of the Income Tax Act. We would like to see these issues addressed.
- Paragraph 51A of the Eighth Schedule allows for the tax free transfer of residences out of companies and trusts into the hands of individuals. The provision is unclearly worded in respect to the 'main use' criterion. Specifically, the requirement that the residence must have been 'mainly used for domestic purposes' by a connected person during the qualifying period is unclear in that it is uncertain whether the word 'mainly' is meant to apply on the basis of time, area or both. It is also not clear whether or not one must only take into account use by the connected person in applying the provision.
- The treatment of contributed tax capital (CTC) in cases where one class of shares is converted into another class is unclear.
- The wording of section 22B of the Income Tax Act and paragraph 43A of the Eighth Schedule do not align following the promulgation of the 2011 Taxation Laws Amendment Act. The amendments to these provisions in any event seem to be at odds with their intention.
- The wording of section 18 of the Income Tax Act is unclear as to whether a taxpayer who is under the age of 65 years can get a full deduction of medical aid contributions in excess of 4 times the capped amounts, or whether these amounts form part of the 7.5 per cent of taxable income computation. The problem is the use of the words 'under this subparagraph' in section 18(2)(c)(ii).
- We would like to see some changes to provisional legislation where the estimates are prepared that it is not the estimated income that is looked at for additional penalties, but rather the under payment of tax after all credits have been taken into account.
- That second provisional tax payment be moved from end of February to end of March. This would assist taxpayers (the majority of whom have February year ends) in being able to more accurately estimate their income.
- Increase audits for refunds on assessment from R10 000 to R30 000.
- Further clarity in respect of the wording of sections 9(1)(g) and 10(1)(gC) as it relates to the taxation of foreign pensions in the hands of tax residents and non-tax residents of South Africa. The current wording of the provisions contained in the Income Tax Act results in various interpretations. Consequently, there are significant delays when dealing with the taxation implications of pension lump sum withdrawal benefits, particularly in the circumstance where a South African tax resident renders services outside South Africa for a significant period of time immediately before the lump sum benefit accrues.
- The provisions contained in paragraph 9(7) of the Seventh Schedule dealing with the provision of residential accommodation for expatriate employees to be extended to a 36 month period in accordance with a recent Binding Private Ruling that was issued by SARS. This will provide an incentive for foreign nationals to work in South Africa for an extended period of time, i.e. up to 3 years to allow for effective skills transfer without having to weigh up the cost of the provision of residential accommodation by the employer and the significant fringe benefit tax consequences.
- Given that current electricity consumption is unsustainable, we would like to see further Government funding to incentivise the installation of solar water geysers in private homes and businesses.
- We'd like to see South African VAT legislation harmonised with global best practice through the introduction of place of supply rules.
- We'd like to see legislation introduced that will level the playing field between taxpayers and the Revenue authorities - the legislation should apply automatically and should allow for assessments to become final and disputes to be regarded as being resolved if the Commissioner does not deal with queries and other submissions within a legislated framework.
- We'd like to see protection for vendors legislated where SARS delays the registration process unnecessarily or as a result of trivial issues.
- We'd like to see interest payable on delayed refunds to be paid automatically.