Breakfast after the budget
This morning the UCT Graduate School of Business partnered up with Deloitte the tax guys to deliver a very scrummy breakfast (free if you asked for the invite! Thanks Deloitte and UCT GSB) and to have a look at the budget and what it means.
There were three speakers at the event who each had a chat about the way they see it, there was then a short panel discussion and the floor was opened to questions.
The three speakers were from Deloitte, Investec and the National Treasury. Deloitte told us that there was an ongoing tax reform process that started ten years ago already.
The Treasury has taken a long term incrementalist approach to tax reform and it is expected to continue for some years yet. The reforms are aimed at broadening the tax base and modernising the Revenue services and the methods it uses to tax.
Deloitte also expect the entire tax act to be rewritten into plainer English. It was noted that the tax submission form has been massively simplified and that the act itself was on the agenda for a plain English version.
It was envisaged that there would be major reforms of the social security aspect of tax law, specifically retirement, pension and provident funds. SARS has brought their efiling deadline for this year forward to the 20th of November.
The speaker from the Treasury is an American expert brought in as an advisor. He stated that South Africa is treated unfairly by the international investment community because we are an African developing nation.
They apply different rules to us as to them themselves.
The example he gave was of two drunks in a bar with massive tabs already, who are so drunk, and so much in debt, they just think, put it on the tab and let get drunker.
These two drunks would be the UK and the USA.
If a drunken South African then staggered into the same bar and tried to get a round on his tab, he would be thrown out by the bar tender for being under the influence.
This analogy highlights the massive bailouts going down over seas and the punishment that would be meted onto us if we were to pursue that same policy.
Trevor Manuel takes a cautious, methodical approach and slow reform rather than massive stimulus will be the way.
The Treasury decided in this budget that stimulus needs to be put directly in consumers' pockets, so they granted personal tax relief, as this will stimulate spending right away rather than cutting corporate tax, which would probably be swallowed by profit taking.
Out of the R 13.6 Billion in personal tax relief R 9 billion is to offset the recent high inflation rate and the rest is for real tax relief.
Environmental taxation was a new theme introduced in this budget and is a back burning long term project to incentivise environmentally ethical behaviour.
For example tax on cars would now be linked to carbon cost, so an SUV driver should expect to pay more tax for their big polluter.
The guy from Investec came from a conservative economic ideology that seemed at odds with the two other panellists.
Justmoney reckons that the Treasury is on a long term track that will develop and benefit our country for many years to come, and while they are massively concerned about the current state of the world economy, they know we get judged on different standards and are more worried about long term stability than protecting short term profits.
When you budget it allows you to plan for the future a bit better, so why not take that tax saving put it into a savings account and get your self a nice little bonus come year end.