Just this morning we shared Mmusi Maimane’s six-point plan on getting South Africa’s economy back on track as swiftly and quickly as possible.

Our economy has come under another round of scrutiny ever since Standard & Poor’s Global Ratings lowered South Africa’s rand debt to “junk-status” and “cut the foreign-currency rating to two levels below investment grade,” reports Business Insider.

So rude – but I guess we deserve it.

Joon Chong and Wesley Grimm at Webber Wentzel are another entity looking at how to fix the economy, and they believe that this year’s tax revenue is projected to fall short of the 2017 Budget estimate by R50,8 billion.

In other words, the largest “under-collection” since the 2009 recession.

So what are they going to do about it? It’s suggested they will increase the capital gains tax (CGT) so that “full capital gain realised on disposals is taxed”:

The CGT inclusion rates are currently 40% in respect of individuals and special trusts; 80% in respect of companies and 80% in respect of other trusts. The CGT rates stated above were only introduced on 1 March 2016.

Due to the recent increase in the maximum marginal income tax rate for individuals and trusts to 45%, the effective CGT rate increased from 16.4% to 18% for individuals and special trusts and from 32% to 36% for other trusts.

The effective CGT rate for companies remains unchanged at 22.4%.

I think I just went cross-eyed, so thank the high heavens I have professionals handling my taxes.

But while this means more money for the fiscal, it will also “reduce the appetite of investors and make it more expensive for companies to conduct business”.

And whose paying? Well, let’s look at it like this.

Due to a trifecta of social challenges – inequality, poverty and high levels of unemployment – as well as economic stagflation, rampant government expenditure and bureaucratic paralysis, not many are able to pay taxes.

In fact, the figures are pretty sad:

The South African Revenue Service (SARS) data for 2016 reflects that approximately 1% of the South African population pays 60% of the South African personal tax which is collected by SARS and less than 600 companies pay 60% of the corporate income tax, it said.

So Webber Wentzel provided a number of alternatives to increasing the CGT rates including:

• Increasing the Value-added Tax (VAT) rate
• Introducing a form of wealth tax
• Implementing further Special Voluntary Disclosure Programmes (SVDP).
• Increasing the donations tax rate.

And I would add the introduction of church taxes, but that’s just me.

Anyway, at the end of the day, Webber Wentzel argues that the country can’t just be taxed in prosperity. Although those changes are yet to come, their obvious overburdening of an already narrow and highly-taxed tax base will not improve South Africa’s position.

However, to be prepared, gather your documents and get sorted with Galbraith | Rushby.

Local and reliable tax consultants, they have to keep up to date with what is going on.  As soon as Malusi Gigaba gives us the breakdown on all this, they will follow through with whatever action needs to be taken in a swift and professional manner.

Tax sorted, and one less thing to worry about.

[source:businessinsider]