Weathering the storm* Budget 2009 PwC *connectedthinking
Market capitalisation of banks Citigroup HSBC 255 JP Morgan 215 165 RBS UBS 12 116 0 19 97 85 4.6 35 June 2007/ # Jan 2008 Goldman January 2009 Societe Deutsche Sachs Credit Generale Bank Morgan Agricole 100 80 76 ABSA # Stanley Standard # 67 Firstrand # 49 49.8 19.5 Nedbank # 12.5 6.2 11 34.6 7.9 3.8 35 26 10.3 17 16 Budget 2009 PricewaterhouseCoopers January 2009
Change in the market capitalisation of selected stock markets Shanghai SE ‐ 64% Bombay SE ‐ 56% Hong Kong Exchanges ‐ 50% The Stock Exchange ‐ 46% Deutsche Börse ‐ 45% Tokyo SE ‐ 41% NYSE Group ‐ 41% Korea Exchange ‐ 41% Bursa Malaysia ‐ 39% Egyptian Exchange ‐ 38% Australian SE ‐ 34% London SE ‐ 33% Mexican Exchange ‐ 26% Buenos Aires SE ‐ 23% JSE ‐ 20% Source: World Federation of Exchanges ‐ 70% ‐ 60% ‐ 50% ‐ 40% ‐ 30% ‐ 20% ‐ 10% 0% Annual % Change: Dec 2007 to Dec 2008 Budget 2009 PricewaterhouseCoopers January 2009
Changes in house prices PricewaterhouseCoopers Budget 2009 Annual % Change in Average Nominal Prices ‐ 18% ‐ 16% ‐ 14% ‐ 12% ‐ 10% ‐ 8% ‐ 6% ‐ 4% ‐ 2% 0% 2% 4% US US Britain Britain Ireland Ireland New Zealand New Zealand Denmark Denmark Japan Japan South Africa South Africa Germany Germany China China Australia Australia January 2009
Paying Taxes in South Africa
A global comparison of tax compliance Findings of the World Bank and PricewaterhouseCoopers study show that South Africa was ranked 23 out of the 178 countries for ease of compliance Budget 2009 PricewaterhouseCoopers January 2009
The results for South Africa 2009 (2008) Result Rank Total Tax Rate 34.2% (37.1%) 51 (62) Hours to comply 200 (350) 73 (131) Number of payments 9 (11) 16 (24) Overall ranking 23 (61) Budget 2009 PricewaterhouseCoopers January 2009
Cost – The Total Tax Rate ranking A reduction of 2.9% improved the ranking by 11 places A further 5% reduction in the TTR could improve the ranking for South Africa by 20 places 30 South Africa 28 Rank 51 26 24 22 Number of countries 20 18 Gambia 16 Rank 178 14 Vanuatu 12 Rank 1 10 8 6 4 2 - 0-5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 41-45 46-50 51-55 56-60 61-65 66-70 71-75 76-80 81-85 86-90 91-95 96-100 >100 TTR Budget 2009 PricewaterhouseCoopers January 2009
Time – the hours to comply ranking A reduction in the number of hours of 150 improved the ranking by 58 places A further reduction in the hours to comply by 50 could improve the ranking for South Africa by 21 places South Africa 32 30 Rank 23 28 26 Number of countries 24 22 20 18 Brazil 16 14 Rank 178 12 10 8 Maldives 6 4 Rank 1 2 - 0-50 51-100 301-350 351-400 401-450 451-500 501-550 551-600 601-650 651-700 701-750 751-800 901-950 951-1000 >1000 101-150 151-200 201-250 251-300 801-850 851-900 Hours to comply Budget 2009 PricewaterhouseCoopers January 2009
Total Tax Contribution 2007/8 Survey Results
Average number of taxes Taxes borne The average number of taxes borne is 8.7 2007/8 The average number of taxes borne is 8.7 14 Number of companies reporting data 12 10 8 6 4 2 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Number of taxes reported (value or zero) Budget 2009 PricewaterhouseCoopers January 2009
Average number of taxes Taxes collected The average number of taxes collected is 3.2 Data Quality 2007/8 – Taxes collected 30 Number of companies reporting 25 20 15 data 10 5 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Number of taxes reported (value or zero) Budget 2009 PricewaterhouseCoopers January 2009
Tax economics
GDP over 15 years R million 2500000 2000000 1500000 GDP 1000000 500000 0 5 7 9 1 3 5 7 9 9 9 9 0 0 0 0 0 9 9 9 0 0 0 0 0 1 1 1 2 2 2 2 2 Budget 2009 PricewaterhouseCoopers January 2009
Tax as a percentage of GDP 30.00% 25.00% 20.00% 15.00% Tax/GDP% 10.00% 5.00% 0.00% 2009 1995 2000 2005 Budget 2009 PricewaterhouseCoopers January 2009
Main sources of tax revenue 2010 1995 Other Other Customs Customs and excise and excise Individual tax Individual tax VAT VAT Corporate Corporate tax and tax and STC STC Budget 2009 PricewaterhouseCoopers January 2009
Growth in registered taxpayer base 6000000 5000000 4000000 3000000 2002-03 2007-08 2000000 1000000 0 Individuals Companies VAT vendors PAYE employers Source – Tax Statistics – SARS and National Treasury Budget 2009 PricewaterhouseCoopers January 2009
Corporate tax rates 35% 30% 25% 20% Normal tax 15% STC 10% 5% 0% 1995 2010 Budget 2009 PricewaterhouseCoopers January 2009
Reducing the inflationary impact for individuals 600000 500000 Tax threshold <65 400000 Tax threshold >65 300000 Maximum rate 200000 threshold 100000 0 1995 2010 Budget 2009 PricewaterhouseCoopers January 2009
Which income group received the largest cash benefit? 120000 100000 80000 60000 Tax saving 40000 20000 0 R 100,000 R 250,000 R 500,000 R 1,000,000 Budget 2009 PricewaterhouseCoopers January 2009
Which income groups contribute the most tax? 80% 70% 60% 50% 40% Assessments 30% Tax assessed 20% 10% 0% <R150000 R150000– >R300000 R300000 Budget 2009 PricewaterhouseCoopers January 2009
Tax administration has changed • Formation of consolidated revenue service • Large business centres in major areas • Audit and risk focused • Specialised units • Revenue targeting • Stricter enforcement • New GAAR and reportable arrangements • Advance ruling mechanism • Online filing Budget 2009 PricewaterhouseCoopers January 2009
Tax law and practice has changed Base broadening Relief • Worldwide tax • Group relief • CFC imputation • Learnership allowances • Capital gains tax • Broad-based employee share schemes • Skills development levy • Building allowances • Plastic bag levy • Small business relief • Micro business simplification • Electricity levy • Venture capital companies • Mineral royalties • Strategic industrial projects • Exchange differences • Environmental investment • Interest recognition • Wider tax treaty network • Executive share schemes • Participation exemption • Transfer pricing • VAT on financial services • Administrative penalties Budget 2009 PricewaterhouseCoopers January 2009
2009 amendments
Tax highlights • Corporate tax rates unchanged • Inflationary relief for individuals • CGT reform for primary residences • Mineral royalties deferred • Environmental fiscal reforms • STC to be replaced late 2010 • VAT rate remains at 14% Budget 2009 PricewaterhouseCoopers January 2009
Tax highlights (continued) • Travel allowances “deemed” mileage to go in 2010/11 • Deduction to be allowed for post-retirement medical aid expenditure by companies • Additional 15% deduction for energy saving investment • Exemption or CGT treatment for CER certificate proceeds Budget 2009 PricewaterhouseCoopers January 2009
Indirect tax • • New and increased environmental levies - Plastic bag levy increased from 3c to 4c - Incandescent light bulbs to be taxed at R3 per bulb - CO 2 emissions factored into ad valorem vehicle taxes - International air passenger departure tax increased: • R150 (R120) and • R80 (R60) for SACU destinations • Fuel and RAF levy increases: - Petrol 40.5c/litre - Diesel 41.5c/litre • Increased excise duties on tobacco and alcohol Budget 2009 PricewaterhouseCoopers January 2009
Taxes: Individuals – What’s in it for me? Taxable income 2009/2010 2008/2009 R100 000 R8 244 R9 720 R200 000 R31 004 R33 430 R300 000 R61 004 R64 920 R500 000 R133 704 R138 730 R1 000 000 R333 204 R338 730 Budget 2009 PricewaterhouseCoopers January 2009
The taxpayer in court • The taxes and issues • Notable issues - Income tax 14 • Attachment of assets - STC 2 • VAT evasion - VAT 2 • Punitive costs - Other 7 • Trading stock • The score • Tax avoidance - Taxpayer 9 - Tax collector 16 Budget 2009 PricewaterhouseCoopers January 2009
SARS developments eFiling Notified administration initiatives • Automated data capture • More frequent employees tax recons • Employees tax recons and • Extension of enforcement to UIF IRP5 forms and SDL • Tighter filing deadlines this year Audit focus • Tough times • Tough measures • Audit intensity may increase • Focus issues - Trading stock - Zero-rated supplies to non- residents Budget 2009 PricewaterhouseCoopers January 2009
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