POLICY PRIORITIES
Since 1994 - disciplined fiscal policy & concerted effort in broadening tax bases, which enabled us to reduce tax rates on all fronts
Fairness between taxpayers
Inter-sectoral neutrality and efficiency
Globalisation: reduce artificial tax incentives for capital flight
International competitiveness of SA economy - "superb fiscal policy"
Process
- Legislation must be put in place to ensure certainty for taxpayers
- Prevent unwarranted capital flight in anticipation of the new legislation
- Extensive consultation since the beginning of the drafting process
- The committee must give a "voice to the voiceless"
Wealthy foreign retirees
- Sections 9C and 9D in place since 1997
- Submissions are mere anecdote and speculation
- Doubts over the extent of high-quality jobs created?
- The Western Cape property market is robust
- Special pleading for a narrow group of taxpayers.
Employment income exemption
- Basis for exemption - not using government services
- Competitiveness argument is overstated
- No evidence to suggest these individuals would not take foreign postings
- Only highly-skilled people benefit - equity
- Emigration arguments overstated
Corporate - background
- Balance equity, fairness, simplicity with desire to encourage international competition.
- Most real activity will be outside this tax system, encouraging international growth of SA companies
- Target only:
- Mobile passive income
- Mobile foreign business income
- Potentially diversionary transactions
- Prime intention to backstop ineffective transfer pricing rules
Headquarter Companies
- Been raised before. Some preliminary concerns include:
- OECD - "potentially harmful tax practice"
- We could fall foul of our trading partners CFC legislation
- Question merits of selective tax incentives
- Tax is not the most important factor determining the location of headquarter co’s
- Looking at it with the SARB
STC credits and assessed losses
- STC
- Avoided a pure system
- Balanced administrative simplicity and fairness
- Assessed losses
- Protect current revenue stream
- Safeguard against protential base erosion
- Anti-avoidance rules are notoriously complex.
- Most activity in subsidiaries anyway.