THE BANKING ASSOCIATION SOUTH AFRICA


COMMENT ON THE REVENUE LAWS AMENDMENT BILL PORTFOLIO COMMITTEE ON FINANCE

OCTOBER 2005


Overview of Presentation


Equity

· Limitation of medical allowances supported under principle of progressive taxation. (illustrated by impact assessment.)

· Use of allowances for specific industries can result in distortions or can be abused. (film production, PBOs and accelerated depreciation.)

· Consider more use of impact assessments

· Consider alternative of grants and where grants used, ensure benefits are cost effective.


Consistency

· Accelerated allowance for small businesses supported but to be accompanied by relaxing leasing restrictions.

· Banks play an intermediation role and give effect to the policy decisions.

· Restriction of leasing will restrict ability of small businesses to invest.

· Co-operation and convergence in SADC region.

· Farm valuations should not be 30% less than market value (Estate Duty)


Simplicity

· Substantial resources to interpret and apply tax rules.

· UK and USA convergence

· Adoption of International Accounting Standards to resolve ambiguity of derivatives.

· Valuation and taxation of share incentive schemes.

· Need to be regionally and internationally compatible


Certainty

· Reportable Arrangements need to be revisited.

· Penalties for misinterpretation to be waived.

· Increased issue of Practice Notes by SARS welcomed.

· Further steps towards introduction of Advanced Ruling procedures needed.

· Foreign investors welcome greater certainty.


Summary of Recommendations

· Tax amendments for policy objectives to be supported by financial impact assessments.

· Task group to be formed to seek convergence with international best practice and lAS.

· Incentive allowances for small business investments should not be constrained by restricting leasing allowances.

· Resolution of ambiguity in Reportable Arrangements and waive penalties until resolved.