Proposed tax dispensation
for co-operative banks
a)
Simplicity
compliance & administration
b)
Equity
& fairness treat those alike the same way and vice versa
c)
Economic
efficiency non distortionary i.e
must not create tax abritage
d)
Politically
justifiable
e)
Revenue
buoyancy must raise revenue
a)
strengthen
the financial soundness and stability of co-operative banks
b)
Protect
their solvency and viability
c)
Ensure
survival in times of adversity
d)
Prevent
the repercussions of systemic failure in the financial system
a)
While
the co-operative bank is still in the process of building towards meeting the
prudential requirements it should be tax exempt. During this time the co-op
bank is not allowed to redistribute any patronage refund
b)
When
all the prudential requirements have been met the co-op bank will be taxed
according to the smme regime (similar to other
co-operatives). Up to R43 000 of taxable income (after deducting all allowable
expenses) will be tax exempt
c)
Any
distributions (patronage refund) will be taxed in the hands of the members
d)
Further
details of how this will work to be threshed out with tax policy and SARS
e)
Reserve
Fund - We also propose that Section 20 (d) not entirely follow the provisions
of the Co-operatives Act where it stipulates the reserves may be used as
stipulated in the constitution. We propose that a portion of these reserves be
kept by the Agency as a prudential measure (like commercial banks) and put a
condition that these reserves be non-distributable.