Comments on the Medium Term Budget Policy Statement

Overall:

Overall last week’s speech by Minister Pravin Gordhan sends a promising message. With revenue collections currently R31bn higher than expected coming mostly from VAT collections and improved retail spending, we could see some benefits next year in terms of lower tax increases than originally envisaged. However, taxpayers still need to be aware that the proposed National Health Insurance for 2012, which needs to be funded, will impact on next year’s tax increase decisions significantly.

Improved financial management

It is encouraging that the Finance Minister remains focused on improving financial management in government on all levels. His mention once again regarding initiatives that are underway to stop wasteful expenditure and inefficiencies in government sends a strong message to SA taxpayers.

Tax compliance

There is a significant focus on tax compliance which ranges from information exchange with other countries to withholding taxes on monies paid out under government tenders.

Exchange controls

The announcement of a phased approach to the releasing of exchange controls is extremely reassuring for our nation. Individuals will be the first to benefit from the easing of restrictions in terms of foreign investment allowances and blocked funds. South Africa’s Headquarter Company regime, which will provide tax benefits to a South African company which is set up by a multinational to be a springboard into Africa and the rest of the world, will now also have a fighting chance against other jurisdictions. It was stated that the effectiveness of these headquarter companies will not be hindered by exchange controls.

TAXtalk: www.taxtalk.co.za

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