Budget 2004

1
Budget 2004

• Professor Matthew Lester

2
National Budgets 2000 - 2003
3
Comments onNational Budgets 2004 at 1600hrs
Back to sleep we go
JSE Unaffected
At least we dont have To go to
Amnesty/CGT Lectures this year
Great except for Sin Taxes
Whats Matthew going To do this year?
4
Review back to 22/2/2000
Tax Reform
S9E
CGT Announced
RBT Announced
2/2002
5
2002
2002/3 Year of Consolidation
Major legislation Restructures CGT RBT Dividends O
ther
Refinement of CGT/RBT
SNIPERS
Enronitis and Behavior
Tax Reform
Taxation Laws Amendment Act
Revenue Laws Amendment Act
Tax Rate Changes 2001 hangover
6
2003
TAX REFORM
SNIPERS
Taxation Laws Amendment Act Rates and Amnesty
Revenue Laws Amendment Act
7
2003 - Tips for Trevor
Drop maximum marginal rate To 38 percent
Drop VAT to To 12 percent
Drop Corporate rate To 28 percent
Increase social spending..
8
Access to basic services Refuse removal
Distribution of households by type of refuse
removal October 1996 and 2001
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Access to basic services Sanitation

• Distribution of households by type of sanitation
• October 1996 and 2001

10
44 million people
28 million ltUS2 per day
5 million Unemployed
5 million State Pensions
6 million HIV
4 million Taxpayers
So there is no Room for mistakes And .
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And then violence appeared
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And things are a bit uncertain
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ALL DEALS ARE OFF
HOLDING BUDGET
NO CORPORATE TAX REDUCTION TO 28
NO INDIVIDUAL TAX REDUCTION TO 38
NO VAT TAX REDUCTION TO 12
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RSA Tax Collections

• Fiscal year 2000 2001 2002 2003 2004
• R000 R000 R000 R000 R000
• Total tax collections 198,000 215,591 248,000 275,
  000 304,459
• Comprising
• Corporate 30,265 39,667 56,921 69,300 81,150
• Individuals 85,883 86,478 90,389 93,200 96,714
• VAT 48,376 54,455 61,056 70,600 81,000
• Fuel Levy 14,289 14,495 14,923 15,200 16,342
• Transfer Duty 1,821 2,401 2,913 3,500 3,000
• Skills Levy - 1,257 2,717 3,300 3,800
• Sin Taxes 9,470 9,819 10,573 11,302 11,607
• Import duty 6,778 8,226 8,680 9,805 11,000

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Strong Rand
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So who dropped the bat and done a Donald?

• Budget Actual Variance
• Fiscal year 2000 2001 2002 2003 2004 2004 2004
• R000 R000 R000 R000 R000 R000 R000
• Total tax collections 198,000 215,591 248,000 275,
  000 304,459 300,300 (4,159)
• Comprising
• Corporate 30,265 39,667 56,921 69,300 81,150 73,79
  0 (7,360)
• Individuals 85,883 86,478 90,389 93,200 96,714 98,
  200 1,486
• VAT 48,376 54,455 61,056 70,600 81,000 81,000 -
• Fuel Levy 14,289 14,495 14,923 15,200 16,342 16,35
  0 8
• Transfer Duty 1,821 2,401 2,913 3,500 3,000 5,100
  2,100
• Skills Levy - 1,257 2,717 3,300 3,800 4,000 200
• Sin Taxes 9,470 9,819 10,573 11,302 11,607 11,665
  58
• Import duty 6,778 8,226 8,680 9,805 11,000 8,800 (
  2,200)

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So lets try again in 2004/5

• Actual Budget Extra
• Fiscal year 2000 2001 2002 2003 2004 2005 2005
• R000 R000 R000 R000 R000 R000 R000
• Total tax collections 198,000 215,591 248,000 275,
  000 300,300 326,956 26,656
• Comprising
• Corporate 30,265 39,667 56,921 69,300 73,790 83,26
  0 9,470
• Individuals 85,883 86,478 90,389 93,200 98,200 105
  ,938 7,738
• VAT 48,376 54,455 61,056 70,600 81,000 89,500 8,50
  0
• Fuel Levy 14,289 14,495 14,923 15,200 16,350 17,40
  9 1,059
• Transfer Duty 1,821 2,401 2,913 3,500 5,100 6,870
  1,770
• Skills Levy - 1,257 2,717 3,300 4,000 4,300 300
• Sin Taxes 9,470 9,819 10,573 11,302 11,665 13,111
  1,446
• Import duty 6,778 8,226 8,680 9,805 8,800 10,476 1
  ,676

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But theres another important message

• Actual Budget Extra
• Fiscal year 2000 2001 2002 2003 2004 2005 2005
• R000 R000 R000 R000 R000 R000 R000
• Total tax collections 198,000 215,591 248,000 275,
  000 300,300 326,956 26,656
• Comprising
• Corporate 30,265 39,667 56,921 69,300 73,790 83,26
  0 9,470
• Individuals 85,883 86,478 90,389 93,200 98,200 105
  ,938 7,738
• VAT 48,376 54,455 61,056 70,600 81,000 89,500 8,50
  0
• Fuel Levy 14,289 14,495 14,923 15,200 16,350 17,40
  9 1,059
• Transfer Duty 1,821 2,401 2,913 3,500 5,100 6,870
  1,770
• Skills Levy - 1,257 2,717 3,300 4,000 4,300 300
• Sin Taxes 9,470 9,819 10,573 11,302 11,665 13,111
  1,446
• Import duty 6,778 8,226 8,680 9,805 8,800 10,476 1
  ,676

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Individual Taxpayer stocktake
4 million identified
Less 3,5 million below R140 Kpa
Leaves 0,5 million below R140 Kpa
Audit the Rest
Drop 250 K Employees Tax
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Individuals Tax Collections
Fiscal year 2000 2001 2002 2003 2004 2005 R000
R000 R000 R000 R000 R000 Total tax
collections 85,883 86,478 90,389 93,200 96,714 10
6,938 Retirement Fund tax 5,098 5,219 5,098 6,900
5,950 6,000 True Individuals Tax 90,981 91.697 95
,487 100,100 102,664 112,938 Base Index at 31
August 94.7 101.2 105.9 118.2 122.9 130.0 2000
Inflation adjusted collection 118,074 124,922
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2001 Tax Tables

• Annual Income Bracket Basic Marginal
• 0 - 35 000 - 18
• 35 000 - 45 000 R 6 300 26
• 45 000 - 60 000 R 8 900 32
• 60 000 - 70 000 R 13 700 37
• 70 000 - 200 000 R 17 400 40
• 200 000 - R 69 400 42
• Primary rebate - R 3 800
• Over 65 rebate R 2 900

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2002 Tax Tables

• Annual Income Bracket Basic Marginal
• 0 - 38 000 - 18
• 38 001 - 55 000 R 6 840 26
• 55 001 - 80 000 R 11 260 32
• 80 001 - 100 000 R 19 260 37
• 100 001 - 215 000 R 26 660 40
• 215 001 - R 72 660 42
• Primary rebate - R 4 140
• Over 65 rebate - R 3 800
• Threshold - under 65 - R 23 000
• over 65 - R 39 154

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2003 Tax Tables

• Annual Income Bracket Basic Marginal
• 0 - 40 000 - 18
• 40 000 - 80 000 R 7 200 25
• 80 000 - 110 000 R 17 200 30
• 110 000 - 170 000 R 26 200 35
• 170 000 - 240 000 R 47 200 38
• 240 000 - R 73 800 40
• Primary rebate - R 4 860
• Over 65 rebate - R 3 000
• Threshold - under 65 - R 27 000
• over 65 - R 43 667

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2004 Tax Tables

• Annual Income Bracket Basic Marginal
• 0 - 70,000 - 18
• 70,000 - 110,000 R 12,600 25
• 110,000 - 140,000 R 22,600 30
• 140,000 - 180,000 R 31,600 35
• 180,000 - 255,000 R 45,600 38
• 255,000 - R 74,100 40
• Primary rebate - R 5,400
• Over 65 rebate - R 3,100
• Threshold - under 65 - R 30,000
• over 65 - R 47,222

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2005 Tax Tables

• Annual Income Bracket Basic Marginal
• 0 - 74,000 - 18
• 74,001 - 115,000 R 13,320 25
• 115,001 - 155,000 R 23,570 30
• 155,001 - 195,000 R 35,570 35
• 195,001 - 270,000 R 49,570 38
• 270,001 - R 78,070 40
• Primary rebate - R 5,800
• Over 65 rebate - R 3,200
• Threshold - under 65 - R 32,222
• over 65 - R 50 000

3,5 Million taxpayers live here
If you want to live here you are going to get
mugged
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A 20 Year storyR1 Million pa today
Year 1985 Index 20.8 Taxable
income 161,013 Tax per tables 73,715 Surcharge 5,
117 Rebates (620) Net tax 78,211 Average tax
rate 48.6
1990 42.4 328,222 137,857 - (1,800) 136,057
41.5
1994 66.6 515,553 214,678 15,503 (1,950) 228,2
30 44.3
2003 2004 122.1 129.2 945,180 1,000,000 350
,172 370,070 - - (5,400) (5,800) 344,772 364,2
70 36.5 36.4
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A 20 Year storyR300 000 pa today
Year 1985 Index 20.8 Taxable
income 48,304 Tax per tables 17,360 Surcharge 1,1
72 Rebates (620) Net tax 17,912 Average tax
rate 37.1
1990 42.4 98,466 36,785 - (1,800) 34,965 35.
5
1994 66.6 232,231 59,496 3,485 (1,950) 61,032
39.5
2003 2004 122.1 129.2 283,554 300,000 85,52
2 90,070 - - (5,400) (5,800) 80,122 84,270 3
6.5 36.4
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A 20 Year storyR100 000 pa today
Year 1985 Index 20.8 Taxable
income 16,101 Tax per tables 3,010 Surcharge 167
Rebates (620) Net tax 2,558 Average tax
rate 15.9
1990 42.4 32,822 8,481 - (1,800) 6,681 20.3
1994 66.6 51,555 15,203 52 (1,950) 12,755 24.
7
2003 2004 122.1 129.2 94,518 100,000 18,729
19,820 - - (5,400) (5,800) 13,329 14,020 14
.1 14.0
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A 20 Year storyR50 000 pa today
Year 1985 Index 20.8 Taxable income 8,051 Tax
per tables 1,288 Surcharge 47 Rebates (620) Net
tax 715 Average tax rate 8.9
1990 42.4 16,411 3,231 - (1,120) 2,111 12.9
1994 66.6 25,778 5,668 - (1,520) 4,148 16.1
2003 2004 122.1 129.2 47,259 50,000 8,507 9
,000 - - (5,400) (5,800) 3,107 3,200 6.6 6.
4
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Corporate STC

• 2005 2004 2003
• Tax rate 30 30 30
• Small corporations 15 15 15 Threshold
  R150K R150K R100K
• MANUFACTURING ALLOWANCE 100 on SBCs

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Future Tax Rates Combined
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Scenes from Forthcoming attractions (Individuals)

• Travel allowance rehash
• Private use
• High value vehicles
• Ad valorem structure review
• Effective 2005

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Scenes from Forthcoming attractions (Individuals)

• Equity Participation
• Broad based employee participation tax-free but
  capped.
• Equity based incentives for highly paid employees
  to be overhauled
• SEE IT ALL IN REVENUE LAWS AMENDMENT ACT IN LATE
  2003.

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Scenes from Forthcoming attractions (Individuals
and Companies)

• Under the Spotlight
• Convertible instruments
• Debt schemes never repayable
• Share redemptions
• Domestic Foreign Hybrids
• Watch out for section 76A activation later in 2003

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Tax Administration and compliance

• Under the Spotlight (but dont expect to know
  more before October 2003)
• Extension of information mining
• Reporting of change of address
• Tax season campaigns
• Advanced rulings
• Regulation of tax practioners
• Witholding Tax on Foreigners
• Taxation of Trusts
• Property holding companies
• ALL THIS MEANS MORE AND MORE DISCLOSURE AND MORE
  EXPOSURE TO PENALTIES AND INTEREST CHARGES

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Tax Administration and compliance

• Under the Spotlight ( but dont expect to know
  more before October 2003)
• One stop service center
• Single business numbers
• Advanced rulings
• E Stamping
• VAT retail system
• Task team for small business

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Major Reviews and Initiatives still outstanding
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Incentives to save

• Interest deduction 2004 (under 65 R10 000)
• Interest deduction 2005 (under 65 R11 000)
• Interest deduction 2004 (over 65 R16 000)
• Interest deduction 2005 (over 65 R16 000)

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2005 Tax Tables

• Annual Income Bracket Basic Marginal
• 0 - 74,000 - 18
• 74,001 - 115,000 R 13,320 25
• 115,001 - 155,000 R 23,570 30
• 155,001 - 195,000 R 35,570 35
• 195,001 - 270,000 R 49,570 38
• 270,001 - R 78,070 40
• Primary rebate - R 5,800
• Over 65 rebate - R 3,200
• Threshold - under 65 - R 32,222
• over 65 - R 50 000

No Incentive to save in a Retirement Annuity
Huge Incentive to Invest in a Retirement Annuity
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Retirement Funds Tax

• 2005 2004 2003
• Tax rate 18 18 25
• RFT is still taking more than R6 Billion a year
  from the pensioner

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But its not all bad news
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Start with some basics
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Its very simple and it goes like this.
Step 4 Then Double it !
Step 3 Determine tax threshold for the over 65
!
Step 1 Widen the tax brackets Over 5 years
Step 2 Increase tax free interest For the over
65!
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There are two of us you know!
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TAX THRESHOLD OVER 65

• GIVES TAX FREE R66 000
• Times 2 pensioners R132 000
• TAX FREE

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TAX THRESHOLD OVER 65

• Gross Income R 171 000
• Less Tax free interest R 16 000
• Taxable income R 155 000
• Taxation R 35 570
• Less Rebates R 9 000
• Taxation R 24 570
• Average rate 14,3 percent

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Retirement Savings
Retirement Funds
Annuities
Home
Investments
Cash
Lump sum
Medical Fund Living Annuity
Dads Annuities R 155 000
Moms Annuities R 155 000
Dads Interest R 16 000
Moms Interest R 16 000
Dads lump sum (pension)
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Incentives to saveSome suggestions

• We have to get an tax incentive for all South
  Africans to save.
• Ditch RFT, (but thats going to take some doing.
• Stuff the second schedule. R120 000 once in a
  lifetime is not going to help anyone.
• Keep going on the tax relief for pensioners on
  interest and annuity income.

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Transfer Duty
Transfer Duty- 2003 Now 0 on R140 000 5 on 140
001 to 300 000 8 on 300 000 plus
Transfer Duty- 2004 Now 0 on R150 000 5 on 150
001 to 320 000 8 on 320 001 plus
Transfer Duty- 2001 Was 1 on R70 000 5 on 70
001 to 250 000 8 on 250 000 plus
Transfer Duty- 2002 Now 0 on R100 000 5 on 100
001 to 300 000 8 on 300 000 plus
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Scenes from Forthcoming attractions (Transfer
Duty)

• Transfer Duty
• Revenue Laws Amendment Act 2003
• Revenue Laws Amendment Act 2004
• Disclosure and Administration
• Inspections and prosecutions

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Stamp Duty

• Stamp Duty on Mortgage Bonds withdrawn
• Stamp duties on fixed deposits and non-
  convertible debentures withdrawn.
• Stamp Duty on long-term lease arrangements to be
  increased.

52
Sin Tax

• Cigarettes 16.55 R4.53 per pack of 20 (VAT
  ex) Total 52 Tax.
• Cigars 15.67
• Pipe Tobacco 17,3
• Dope 0
• Spirits 13,5 / R1,70 per liter
• Beer 9 /4 cents per can

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Fuel Levy 93 Octane

• 2005 2004 2003
• Total Tax per Liter R1,415 R126.5 R120.5
• age of pump price 37.4 35.0 28.8

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Things to do in 2004

• OFFSHORE AMNESTY
• Deadline 29/2/2004
• Applications
• Tax returns and payments
• VAT and employees tax
• Approvals and fines
• Cleanup old structures
• CFCs
• Offshore trusts
• Offshore Investments
• Offshore administration v local administration

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Why I am staying in the new RSA
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Why I am staying in the new RSA
57

• The woods are lovely, dark and deepBut I have
  promises to keep,And miles too go before I
  sleep,And miles to go before I sleepRobert
  Frost