EXPERTS painted anything but a rosy outlook for the economy yesterday. At a budget and economic update breakfast hosted by PKF and Efficient Advice in Port Elizabeth, PKF Durban tax director Paul Gering and Efficient Group chief economist Dawie Roodt identified a few positives following last week’s national budget speech.
However, they mostly still envisaged a gloomy outlook for the economy.
Roodt said there had been no real movement towards a healthier fiscal budget, but it was a sensitive year because of the upcoming elections.
The next three years would be critical for the country’s economy.
A red flag which he highlighted was that only 1.5% of South Africans earned more than R1-million a year, but that they paid 24.7% of all personal income tax.
Another red flag Roodt said was that 0.1% of all companies make more than R100-million profit a year, but paid 64% of all corporate income tax.
In his talk, “The Budget Deficit, Dissaving, Depreciation: How the budget’s dissaving is squeezing the rand”, Roodt said the only way the government could turn the country’s ballooning debt around was with either less current expenditure, more infrastructure expenditure or higher income tax – but he pointed to pitfalls in all of them.
Gering said the budget could have been worse, and that it offered limited tax relief and limited focus on small companies.
“The reduced tax rates applicable to small business corporations are considered ineffective in encouraging investment as the compliance cost of these types of entities is still very high,” Gering said.
Referring to personal income tax, Gering said some adjustments were proposed to treat employees “who bear the costs relating to fuel and the upkeep of their company car in a more equitable manner”.
Gering said SARS also appeared to be spending more time auditing diesel rebates claimed to prior years, and therefore a logbook of diesel used for each vehicle needed to be kept.
This year more regulation is also expected to be implemented by SARS for tax practitioners and getting a single tax registration number for individuals.
Gering said some good news from the budget was encouraged savings. Tax preferred savings accounts are to be introduced over the next year, which would include “tax exemptions for interest, dividends and capital gains granted for investments with an initial annual contribution limit of R30000 and a lifetime contribution limit of R500000”. – Cindy Preller