Pretoria - Governments historic reluctance
to offer tax incentives to attract investments was clearly demonstrated through
the negative comments in the 2017 Budget Review, with a veiled threat that they
may even be removed.
National Treasury stated in the review that
corporate tax revenue can be increased by broadening the tax base. “This can
involve removing tax incentives, and introducing measures to curb tax avoidance
through loopholes and schemes.”
Cova Advisory director Duane Newman says
government is reviewing the effectiveness of all the incentive programmes. “It
is vital that this process be allowed to follow due process.”
He expressed concern about the silence on
the future of a key incentive programme, the Manufacturing Competitiveness
Enhancement Programme (MCEP) in Finance Minister Pravin Gordhan’s budget speech.
The programme has been suspended for two
years while another key incentive which allows for additional tax allowances (the
s12I Tax Incentive) will come to an end in December.
“The minister’s silence is worrisome on
what it communicates to manufacturers on the level of support they can expect
from the state in the near future.”
The MCEP was designed to support companies in
the production sectors to weather very adverse market conditions, secure higher
levels of investment, raise competitiveness and retain employment.
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Although R1.3 billion has been allocated to
the programme in the 2018-19 budget, it has been earmarked for a sector
specific programme in the agro-processing and metals fabrication and generic
manufacturing sectors.
The tax allowance incentive was designed to
support new industrial projects as well as expansions or upgrades of existing
industrial projects.
Newman, also chair of the incentives
committee of the South African Institute of Tax Professionals (SAIT), says it
seems that new major capital projects will have no incentive support going
forward except for instances where approved projects are cancelled and some of
the fully allocated budget becomes available again.
“The balancing of the budget has
significantly influenced the overall incentive allocation” in the medium terms.
…. Between 2016/17 and 2019/20 the total incentive budget will experience negative
growth of 8.1 percent.”
Treasury says reviews of tax incentives
should regularly assess their effect on investment, job creation and growth. “Where
the costs outweigh the benefits, consideration should be given to removing
these incentives.”
Treasury will also review the current tax
incentive for qualifying industrial policy projects which comes to an end this
year. Once the review is finalised a decision will be taken on the future of
the incentive.
Newman says in terms of the “green economy”
there is no clarity on the implementation date for the carbon tax. “As such,
companies
should still operate under the assumption
that the carbon tax will be introduced in January 2018,” he advises.
Lesley O’Connell, PwC tax partner, says a
revised Carbon Tax Bill will be released this year, and is expected to be
tabled in Parliament around June.
The latest developments around the
implementation include that there will be no impact on the price of electricity
during the first phase of the tax until 2020. A revised regulation for the
carbon offset allowance will be published later this year.
SAIT CEO Keith Engel says it takes note of
the plan to introduce the Carbon Tax Bill to Parliament for 2017. “This is the
first time we are seeing a formal commitment from Finance Minister Pravin
Gordhan.”
The sugar tax will be implemented as a levy and both intrinsic and added sugars will fall
Virusha Subban, partner specialising in customs,
excise and international trade in Bowmans tax practice, says the tax will be
mentioned a higher rate of 2,29c/gram of sugar. The announced rate is lower
with a proposed threshold presumably to cater for those products that will be
caught in the net as a result of the inclusion of intrinsic sugars,” she says.