This year’s tax proposals are intended to meet the requirements of the fiscus while supporting consumer and business confidence in the context of a weakening economy.
Significant adjustments have been made to personal income tax brackets, the primary rebate and some thresholds to adjust for the effects of higher inflation during 2008, and to provide real tax relief. Environmental initiatives that promote sustainable development, energy efficiency and investment in new technologies receive support. Industrial policy tax incentives announced last year will be implemented in 2009 and should encourage private-sector investment.
The South African economy has entered a period of slower growth, and this is reflected in lower revenue growth, especially for VAT. Tax revenue for 2008/09 is projected to total R627.7 billion, R14.4 billion less than the budgeted R642.1 billion. Estimated gross tax revenue for 2009/10 is R659.3 billion, or 5 per cent higher than the revised estimate for 2008/09.
The 2009/10 tax proposals and revenue projections take cognisance of a significantly weaker economic environment. The global financial crisis, recession in most of the developed world, a dramatic decline in commodity prices and cooling domestic consumption expenditure have all contributed to a decline in aggregate demand and business confidence.
The economic slowdown is having a negative impact on tax revenues, with the revised estimated tax revenue for 2008/09 projected to be R14.4 billion lower than the budgeted R642.1 billion announced in February 2008. Falling domestic consumption resulted in lower-than-expected domestic output, lower VAT collections and the involuntary accumulation of inventory, which gave rise to higher VAT refunds.
The 2009 tax proposals provide real tax relief to households. A combination of incentives and taxes is proposed to address environmental concerns, with a particular focus on energy efficiency, furthering another key objective of government. The South African Revenue Service (SARS) continues to improve its operational efficiency, and additional Budget Tax Proposals 2009/10 1 Proposal.indd 1 2/7/09 1:03:18 PM steps are proposed to support its modernisation agenda.
Main tax proposals
The main tax proposals include:
• Personal income tax relief for individuals amounting to R13.6 billion
• Delaying implementation of new mineral and petroleum royalties until 1 March 2010
• A final set of amendments to support dividends tax reform
• Incentives for investments in energy-efficient technologies
• Implementation of the electricity levy announced in Budget 2008
• Making certified emission reduction credits tax exempt or subject to capital gains tax, instead of normal income tax
• Taxation of energy-intensive light bulbs
• Reforms to the motor vehicle ad valorem excise duties
• Increases in the Road Accident Fund (RAF) and general fuel levies
• Tax-sharing arrangements with municipalities
• Increases in excise duties on alcoholic beverages and tobacco products
• An increase in the international air passenger departure tax
• Reviewing the tax treatment of travel (motor vehicle) allowances to improve the equity and transparency of the tax system
• Amendments to the treatment of contributions to medical schemes.