Outcry over Treasury’s proposed tax changes
Objections to the proposed tax amendments were raised in parliament by a range of industries
Various sectors of the economy, including the motor, mining and tobacco industries, voiced their concerns in parliament on Tuesday over a raft of proposed tax changes by the National Treasury.
The proposed changes are contained in the draft Taxation Laws Amendment Bill, Tax Administration Laws Amendment Bill, Income Tax Amendment Bill, and Rates and Monetary Amounts and Amendment of Revenue Laws Bill.
Parliament’s finance committee conducted public hearings on the bills.
The Minerals Council SA’s senior policy analyst, Aubrey Ramawa, also raised objections to the Carbon Tax Act, calling for a delay in the implementation of the tax until all the enabling regulations and legislative regime were in place. He said failure to do so would exacerbate the regulatory uncertainty which undermined investment in the mining sector.
Ramawa estimated that carbon taxes will cost the mining industry about R5.4bn annually resulting in further job losses.
Business Unity SA (Busa) said the “flawed” Carbon Tax Act’s implementation date should be deferred until all issues in the act and outstanding regulations are dealt with.
The Tobacco Institute of SA and British American Tobacco (BAT) objected to the increase in the excise duty on tobacco products that was announced by finance minister Tito Mboweni in the February budget. They called for an urgent excise duty freeze on cigarettes, pointing out that further increases would not necessarily result in higher tax revenues but a shift to illicit products.
The motor industry represented by Motus, which imports Hyundai, Kia, Mitsubishi and Renault vehicles together with the BMW Group, objected to proposed changes to the Customs and Excise Act which would require that all customs duty payable on imported goods be taken into account when calculating the value for the purposes of ad valorem duty on such goods. Currently only nonrebated customs duty is used for the calculation.
Motus operational executive Harvey Adler said in his submission that the proposed increase in taxes on imported vehicles would be passed on to consumers and result in an increase of vehicle prices. It also went against the plans of the automotive industry master plan. BMW added that the proposed changes would undermine the stability and credibility of SA’s automotive policy, impact on future investment decisions, and undermine its export competitiveness.
The Southern African Venture Capital and Private Equity Association (Savca), The 12J Industry Association of SA and Kingson Capital objected to the proposal to introduce a R2.5m cap on the tax deduction that can be claimed for investments in venture capital companies saying this would limit local investment in a crucial sector of the economy. The Treasury has justified the proposal as being necessary to stamp out abuse of the incentive by high net-worth individuals just before the end of the tax year.
Savca head of regulatory affairs Shelley Lotz warned that the proposed measure would result in current structures being non compliant and that capital would flow offshore instead of being invested in local small-, medium-, and micro-sized enterprises (SMMEs).
The change in the tax incentive for special economic zones (SEZs) was one of the issues raised by the SA Institute of Chartered Accountants whose project director for tax advocacy Sharon Smulders noted it would limit the tax deduction to those new businesses and expansions of existing businesses which were established in the SEZs. Those businesses in industrial development zones and those established before the SEZ legislation became effective would not qualify.
PwC tax policy leader Kyle Mandy said the proposed requirement that expansions of existing businesses in SEZs must result in a 100% in gross income to qualify for the incentive was “completely unrealistic” and argued that the proposed changes to the SEZ tax incentive are unnecessary.
He also argued that the Treasury’s proposal to address abusive dividend-stripping was extremely broad and should be limited in its application. JA Transaction Solutions also submitted that the proposal would have an unwarranted adverse impact on legitimate transactions.