National Treasury indicated within the 2020 funds that authorities is decreasing the variety of tax incentives within the tax system, and the 2021 funds has reminded taxpayers that 4 additional tax incentives are scheduled to lapse on reaching their respective sunset dates.
Treasury famous that: “Tax incentives often undermine the principles of a good tax system, which should be simple, efficient, equitable and easy to administer.”
It additionally noticed that: “Tax incentives and some expenditure deductions provide favourable tax treatment to certain taxpayers or groups of taxpayers, and inevitably result in the creation of vested interests and lobby groups.”
The incentives in respect of airport and port belongings, rolling stock, and low-cost residential items have a sunset clause of February 28, 2022.
The movie incentive, which gives for the exemption from regular tax of earnings derived from the exploitation rights of accredited movies, expires on January 1, 2022.
Treasury has invited stakeholders to present detailed causes on why the sunset clauses ought to be prolonged. The submission deadline is March 31.
However, Treasury has not indicated what info it requires, or in what format.
Nevertheless, on receiving the mishmash of data from varied sources, Treasury “will determine the extent to which these tax incentives enhance efficiency, transparency and fairness in the business tax system, together with how these incentives [will] facilitate economic growth through improved investment and competitiveness”.
Incentives placed on watch
Urban improvement zones and learnership tax incentives
Treasury is at the moment reviewing the city improvement zones and learnership tax incentives. The incentives have been prolonged for 2 years whereas their critiques are accomplished.
Research and improvement tax incentive
The analysis and improvement (R&D) tax incentive launched in 2006 is run by the South African Revenue Service (Sars) and the Department of Science and Innovation (DSI), previously known as the Department of Science and Technology (DST). In 2015 the minister of the DST established a activity workforce to help in ironing out issues and making suggestions.
Bizarrely, the DST wouldn’t permit any patent legal professional to sit on the duty workforce.
In the opinion of a widely known patent legal professional “the task team’s published report [April 2016] is riddled with misstatements of law, inaccuracies and an entirely superficial treatment of intellectual property and legal concepts”.
The R&D incentive expires on October 1, 2022, and Treasury and the DSI will be publishing a dialogue paper inviting public touch upon the way forward for the motivation.
Perhaps this time round, recommendations made by certified consultants will be entertained, and the R&D incentive will be simpler.
Tax provisions for journey and dealing from dwelling
Treasury will assessment present journey and residential office allowances to examine their “efficacy, equity in application, simplicity of use, certainty for taxpayers and compatibility with environmental objectives”.
Treasury recognises that this might probably have an effect on wage structuring, and can start consultations throughout 2021/22.
Does working from dwelling in casual put on prove to be dearer than the price of travelling to work? And for many who are already claiming bills, beware the capital features tax sting-in-the-tail in the event you personal your private home.
Upstream petroleum business
After two massive fuel discoveries off the coast close to Mossel Bay, Treasury and the Department of Mineral Resources and Energy are of the view that there’s potential for additional exploration. They will collectively publish a dialogue paper on potential tax reforms.
A tax incentive mustn’t solely yield larger advantages than the associated fee in financial phrases, it must also create sustainable companies that can develop and thrive as soon as the motivation is used up. Obviously, the motivation ought to enhance employment. Other required measurements ought to be contained within the laws.
Unfortunately, the unfastened laws written round sure incentives creates alternatives for the tax avoidance sharks to provide you with artistic methods of utilising the motivation.
The sharks will flip the motivation right into a saleable product. Without sharp watchdogs at Sars to audit all of the incentives, and to problem these getting abused, the fiscus is unnecessarily drained.
Read: Government targets tax incentives as a result of of ‘persistent trade-off’
Treasury ought to publish an annual price profit evaluation of all of the tax incentives as a part of the annual funds. The info ought to embrace the price of every incentive, the whole income earned, the whole quantity of tax paid (if any), in addition to the brand new jobs created within the payroll system (not moved from one division to one other).
There must also be info relating to companies that closed down after the motivation ran its course.
The public has a proper to understand how their tax money is allotted (and the way it was wasted).
Read: Little-known tax incentives enhance business case for renewable vitality