Gordhan likely to target rich for taxes

Finance Minister Pravin Gordhan is scheduled to announce the budget in Parliament on Wednesday‚ 27 February.

Barlow said at a pre-budget media briefing with several Deloitte directors that the "race to the bottom" in terms of company and individual tax rates had turned and the pendulum was now swinging in the other direction.

"Over time‚ tax rates will move upwards‚" he said. "This is a trend worldwide."

However‚ Deloitte directors do not believe that Gordhan will introduce a wealth tax. They thought it likely that greater emphasis would be placed on tax compliance to ensure the rich paid their dues.

The government‚ they say‚ will need to strengthen compliance as it tries to raise revenue in the context of sluggish economic growth. The onerous penalty regime contained in the recently promulgated Tax Administration Amendment Act will assist in this endeavour.

Le Roux Roelofse expected the South African Revenue Service (SARS) to "crack the whip" to enforce tax compliance in the year ahead.

"If SARS is looking for more money‚ compliance is about the only way to go. There is a limit to the new taxes that can be introduced. As it stands‚ the new law will be a big source of additional revenue for SARS‚" he said.

Fellow director Geoff Kroon believed a much more vigorous enforcement of transfer pricing - that is the pricing of goods and services between companies within the same group - could be expected in the year ahead.

No change in the rate of company tax or in capital gains tax is expected‚ although Danny Flanagan hoped that assistance would be provided to groups of companies‚ by allowing them to consolidate their tax liability and benefit from losses in a subsidiary. A lower company tax rate for special economic zones is expected to be announced.

Anthea Scholtz would like to see further lightening of the burden of tax compliance on small and medium enterprises and expected there to be further movement on limiting the amount that can be deducted for contributions to retirement funds.

There was some speculation among the directors that Gordhan might announce an increase in VAT‚ which Deloitte directors said was comparatively low by world standards.

But higher VAT would hit the poor the hardest‚ and the Treasury has opposed such an increase on those grounds for many years.

Roelofse believed that an increase in VAT, if implemented, would have to be linked to a specific programme such as the National Health Insurance scheme to make it more "palatable".