1. SAIT Comments on the Draft TLAB and TALAB 2014 Presenters: Mr Job Kabochi Mr Lesedi Seforo Mr Erich Bell

2. Introduction  Largest tax association in SA – more than 11 000 members ‘specialising’ in taxation.  Comprehensive written submission developed by SAIT technical department, our members and 5 specialist committees.  Submission ScoF focused on technical matters.  Policy and other considerations require further review in relation to impact on economy, social challenges and National Development Plan.

3. Termination of Agricultural Zero-rate  Revenue collection vs. cash-flow impact for small farmers  Our views  Proposal be deleted in favor of stronger enforcement  Retain ZAR 1.5m threshold test for qualifying farmers  ‘Category D’ registration be amended allow earlier VAT refunds

4. Import VAT Timing  Proof of payment = customs receipt; clarity welcome  Our concerns  Delayed input tax credits = adverse cash-flow  Financial vs VAT accounting disparity  In our view risk to fiscus mitigated by:  SARS’s clearing agent vetting process  Agents’ guarantees paid to SARS  VAT credits be allowed if payment made by return filing date

5. Electronic Services Enterprise  Multiple-proxy test welcome  Clarity required: Origination of payment from South African bank Invoice delivery address - physical vs electronic address Future consideration - B2C vs B2B

6. Relevant Material Current definition Any information, document or thing that is foreseeably relevant for the administration of a tax Act… What is the administration of a tax Act?  It basically means anything that may affect the amount of tax that a person owes SARS Proposed definition Any information, document or thing that in the opinion of SARS is foreseeably relevant for the administration of a tax Act… Why the change?

7. Change to the definition Concerns  It has been left to SARS’ discretion to determine what is relevant  No obligation on SARS to explain how the material is relevant.  No mechanisms available for the taxpayer to object.

8. Small business corporations  Current incentives  Accelerated write offs (manufacturing assets in full in YOA brought into use whilst for non-manufacturing assets election between a 50/30/20 or section 11(e) allowance.  Taxed according to a sliding scale: Taxable incomeRate of tax Not exceeding R67 1110 per cent of taxable income Exceeding R67 111 but not exceeding R365 000 7 per cent of taxable income that exceeds R67 111 Exceeding R365 000 but not exceeding R550 000 R20 852 plus 21 per cent of amount by which taxable income exceeds R365 000 Exceeding R550 000R59 702 plus 28 per cent of amount by which taxable income exceeds R550 000

9. Small business corporations (continued)  Proposed changes  Small business corporations to be taxed in the same manner as all other companies (28 per cent tax rate from the first Rand).  If tax compliant in terms of tax returns and liabilities, the small business corporation would receive a refundable compliance rebate of R15 000 per YOA.  Nothing mentioned in TLAB 2014 about the accelerated write off clauses.  Concerns regarding proposed changes  Internal compliance costs for a small business entity is over R60 000 per year of assessment.  The only small business corporations that stand to benefit is small business corporations with a taxable income of below R53 574 (a SBC with a taxable income of R550 000 stands to loose R79 298 in taxes should the proposal be implemented).

10. Small business corporations (continued)  Conclusion  It is proposed that incentive be provided according to a sliding scale starting at R15 000 and moving up to the range of R 100 000 for your larger small business corporations.  Currently incentive is aimed at incentivising micro type of enterprises at the cost of flourishing small businesses.

11. Thank You