South African Budget 2017: Nasty surprises still coming on the tax front
By Patricia Williams, Tax Partner, Bowmans
Tax increases of R28 billion were announced in the 2017 Budget speech by the South African Minister of Finance, Pravin Gordhan, on Wednesday, 22 February 2017.
While these are the tax increases that will take effect within this year’s legislative cycle, the Budget Review 2017 highlights a few further tax increases that will still be implemented at a later stage, some of which are “nasty surprises”. This includes a host of “other” tax types, implemented in relation to specific areas of social concern.
The tax on sugary beverages will be introduced, as part of the Customs & Excise tax system, as soon as the relevant legislation can be passed, which will most likely be later in 2017. Following the consultation process, the final tax is proposed at 2.1 cents per gram of sugar content in excess of 4 grams per 100ml. Of this, 50% would apply to concentrated beverages.
Carbon tax is still scheduled to be implemented, with a revised bill for public consultation expected mid-2017, although the current intention is that there would be no effect on electricity prices until 2020.
National gambling tax
One would be forgiven for thinking that this tax had fallen by the wayside over time, given that there has been no real movement for years. However, the Budget Review 2017 confirms that the national gambling tax proposed in the 2012 Budget is indeed alive and well, with the State Law Advisor having certified the relevant draft Bills, which will be taken to Cabinet in 2017. At various stages, the anticipated taxes in relation to gambling included: 6% tax on online gambling; 1% tax on casino revenue (in addition to provincial taxes or levies), and a final 15% withholding tax on gambling winnings over R25,000. In the circumstances, taxpayers will need to wait for the release of the draft Bills, to see what is in store this time!
Acid mine drainage tax
Potential acid mine drainage taxes, alternatively water levies in relation to acid mine drainage, have been the source of much controversy within the industry. While we are not yet at taxing stage, the Budget Review 2017 confirms that the acid mine drainage tax proposed in the 2014 Budget is still on the cards, with a discussion paper outlining the options to address acid mine drainage intended to be released for public consultation by mid-2017.
VAT on petrol and diesel in 2018
Yes, you read that correctly. The Budget Review 2017 proposes that, in the 2018/19 period, the VAT zero-rating on fuel be removed. It goes on to state that, to mitigate the effect on transport costs, the fuel levy may either be frozen or decreased. If indeed this is only a freezing of the fuel levy, the removal of the zero-rating of fuel would result in a 14% increase in the price of fuel to consumers.
Estate duty proposals – to come in 2018
The Finance Minister made it clear that the department has not forgotten the recommendations set out the Davis Tax Committee Estate Duty Report (published on 24 August 2016). These recommendations include increasing the estate duty rate to 25% for that part of an estate with a value over R30 million and the removal of spousal rollover relief, in relation to estate duty, capital gains tax and donations tax (partially offset by an increase in the primary abatement for all estates). There are also various recommendations in this report in relation to trusts, which could potentially include the removal of the “conduit pipe/ flow-through principle”, or that all distributions from foreign trusts be taxed as income.
The Budget Review 2017 indicated that these recommendations in the Estate Duty Report would be considered in the 2018 Budget.