Revenue Laws Amendment Bills, 2007 and Securities Transfer Tax Bills,
2007
30 October 2007
Introduction
Madame Speaker, it gives me great pleasure to introduce the "Revenue Laws
Amendment Laws Bills, 2007" and the "Securities Transfer Tax Bills, 2007".
These bills contain the second instalment of tax announcements contained in my
annual February 2007, Budget Address to the Nation.
Given the complex nature of the South African economy, these Bills cover an
expansive range of tax topics. However, despite these disparate topics,
Government's goals for the tax system remain clear and consistent i.e. to
achieve equity, certainty, efficiency and simplicity. These all call for a
broadening of the tax base and where possible a reduction in the complexity of
the tax code. However, it must be stressed that unintended loopholes exploited
by some taxpayers and their highly sophisticated advisers will not be
tolerated. The additional revenue stemming from the closing these loopholes
will provide scope for further tax reforms, more funds available for critical
expenditure priorities and lower tax rates where deemed appropriate.
Business taxation
In terms of business taxation, the main focus of the Bills is the Secondary
Tax on Companies (STC). The STC rate will be reduced from 12,5 percent down to
10 per cent. This rate reduction comes with the closing of significant
loopholes that have emerged in the market place. A small group of taxpayers
have sought to disguise otherwise taxable sales and taxable dividends through a
variety of means.
Many of these schemes seek to artificially classify both sets of
transactions as a tax-free return of capital or as tax-free intra-group
dividends. While many of these schemes seem remote to all but an elite set of
tax experts, the costs of these schemes should not be ignored. We understand
that some private equity fund managers have been very active in this
regard.
This drive to close loopholes, however, should not be perceived as an
anti-business attitude on the part of government. The set of Bills presented
today contain a range of measures designed to support the growth of business.
Shares held by taxpayers for at least three years will now automatically
receive beneficial capital gains tax rates. For individuals with savings held
directly in the form of shares, this change will mean that there will be
certainty that the tax on growth from these shares will be limited to a 10
percent capital gain rate. Other provisions in the Bills presented today seek
to minimise the tax impact of mergers and acquisitions, many of which are
important for our country's goal of transformation. Finally, in order to
promote infrastructure development, the Bills contain depreciation tax relief
for new and used rolling stock, railways, port infrastructure, environmental
equipment and commercial buildings.
Special situations
As strange as it may seem to some, our tax system does have a sympathetic
heart. Beyond the broad-based relief in income tax rates granted earlier this
year, certain situations call for special assistance. Of particular note is the
taxation of sporting bodies. Our national and provincial sports organisations
contain both professional and amateur sports divisions. Our children in amateur
sports today need support so that they can become our future stars in rugby,
soccer and cricket (or at least so they can enjoy themselves along the
way).
Under the proposed amendments, professional sports organisations can now
obtain tax deductions for funding amateur sport development directly. Most
funding for amateur sports is derived this way, so the deduction should play a
significant role. On a different note, certain workers face the risk of
physical injury (and even death) in their jobs. In order to compensate them for
this danger, government presently provides tax-free compensation in terms of
the Compensation for Occupational Injuries and Diseases Act, 1993. However,
some employers provide additional death and injury benefits that are currently
subject to tax. The proposed amendments allow for tax-free treatment for up to
R300 000 of these additional benefits. Our police men and women who face daily
risk in protecting our society will be major beneficiaries of this
proposal.
Lastly, many of our poorer citizens lack ready access to banking facilities,
especially in the rural areas. Earlier this year, National Treasury introduced
the Co-operative Banks Bill so that communities can form their own associations
for everyday savings and loans. We are proposing an amendment that complements
this effort by providing small business tax relief for co-operative banks. This
relief spares these co-operative banks from a flat 29 percent tax charge.
Co-operative banks will now be eligible for a tax exemption up to R43 000 of
their annual net income, a 10 percent charge of income up to R300 000 and 29
percent thereafter.
Securities transfer tax
The second set of bills deals with Securities Transfer Taxes on shares. It
is important to note that the Securities Transfer Tax Bills, 2007 do not
represent a new tax. These Bills merely combine pre-existing stamp duties on
unlisted shares and pre-existing Uncertificated Securities Taxes on listed
shares. The new regime simplifies many archaic rules and streamlines
exemptions. Most taxpayers should benefit from the reduced compliance costs
associated with the new regime.
Once again, I would like to thank the Chairman Nhlanhla Nene for his
leadership, and the members of the Portfolio Committee for their constructive
role in the process. Madame Speaker, I hereby table the "Revenue Laws Amendment
Bills, 2007 and the "Securities Transfer Tax Bills, 2007."
Issued by: National Treasury
30 October 2007
