Tax Increases Next Year?

With the introduction of Dividends Withholding Tax during the 2013 fiscal year, corporate taxpayers (effectively) saw an increase in the effective tax rate from 34.55% to 38.8% while the Royalty withholding tax was increased from 12% to 15% in the 2015 fiscal year. In the 2016 fiscal year, individual taxpayers bore part of the brunt of meeting fiscal demands when the maximum marginal rate for individuals were increased by one percentage point from 40% to 41%. In addition, 2016 saw an increase in the maximum transfer duty marginal rate from 8% to 11%. The 2017 fiscal year, in turn, has also seen its fair share of tax increases with an increase in amongst others, the effective capital gain tax rate from 13.3% to 16.4% for natural persons and special trusts, 18.6% to 22.4% for corporates and 26.6% to 32.8% for trusts.

Will we see more increases in the 2018 fiscal year? Early signs indicate a resounding, yes:

  • The 2016 Tax Administration Laws Amendment Bill proposes amendments to various tax acts that gives the Minister of Finance the power to change tax rates by announcement in the annual Budget Speech. While the power to be bestowed on the Minister remains subject to Parliamentary intervention, it seems as if Government is reading itself for quick and effective increases in tax rates.
  • The Minister made it clear in his recent medium term budget policy statement that Government needs to raise an additional R28bn in tax revenue to meet fiscal targets over the medium term.

If an increase in tax is inevitable, the next and more prominent question on everybody’s lips is –  who is going to pick up the bill? Corporates, individuals, trusts, the South African public in general?

The Minister has made it clear on several occasions that we will only know for sure next year. While there are many ways to collect more taxes, we are left to speculate:

  • The VAT rate has been the elephant in the room for many years. However, an increase in the VAT rate during the 2018 fiscal year is highly unlikely due to the political sensitivity of a VAT rate increase –  perhaps even more so than in the recent past given the current political landscape.
  • The corporate tax rate, currently at 28%, is relatively low when compared to other jurisdictions. However, potential adverse consequences on investment would probably prevent an increase of this rate next year.
  • Perhaps most likely is yet a further increase in the maximum marginal tax rate for high earning individual taxpayers. We will also not be surprised by an increase in Skills Development Levy to assist with the funding demands for higher education.

Either way, chances are very good that taxpayers will be forking out more next year. We will have to wait for the 2017 Budget to see exactly how much more.

eFiling Profile Hacking

VISIT YOUR NEAREST SARS BRANCH TO VERIFY CHANGES TO YOUR PERSONAL

Some taxpayers recently received messages from SARS about the changing of their personal details. If you received this message (and to ensure that the resultant changes are not fraudulent) you are kindly requested to visit your nearest SARS branch as soon as possible with the following supporting documents:

  • Valid original or temporary Identification Document (Green ID book / new ID card / Original Passport/ Driver’s Licence) and a certified copy thereof;
  • Original stamped bank statement not more than three months old that confirms the account holder’s legal name, bank name, account number, account type and branch code, where applicable, or where a new bank account was opened in the past 30 days and a bank statement cannot be produced, an original letter from the bank not older than one month on the bank letterhead with the original bank stamp reflecting the date the bank account was opened;
  • Copy/original proof of residential address or completed CRA01 in the case of proof of residential address that is in the name of a third party; and
  • Power of Attorney in the case where a registered tax practitioner/representative visit the branch to request the stopper to be lifted on behalf of the taxpayer.

For enquiries, please call the SARS Contact Centre on 0800 00 7277.