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SARS PRESENTATIONON THE
2004/05 BUDGET TO THEPARLIAMENTARY
COMMITTEES23 February 2004
Contents
! Revenue over past ten years
! Growth in Revenue since 1994
! Revenue Budget - 2003/04
! Revenue Target - 2004/05
! Budget 2004/05 - tax issuesÿ Key tax proposals
ÿ Improving compliance
ÿ Easing compliance
Revenue over past
ten years
Making relief possible
-8,000,000
-6,000,000
-4,000,000
-2,000,000
-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05
Collections v printed
Collections v revised
PIT Relief
Trend – Individual tax rates
1999/2000 2000/01 2001/02 2002/03 2003/04 2004/05Lowest personal bracket 33,000 35,000 38,000 40,000 70,000 74,000 Lowest marginal rate 19% 18% 18% 18% 18% 18%Highest personal bracket 120,000 200,000 215,000 240,000 255,000 270,000 Highest marginal rate 45% 42% 42% 40% 40% 40%Number of brackets 6 6 6 6 6 6Primary rebate 3,710 3,800 4,140 4,860 5,400 5,800 Additional rebate 2,775 2,900 3,000 3,000 3,100 3,200 Tax threshold for < 65 19,526 21,111 23,000 27,000 30,000 32,222 Tax threshold for 65 > 33,717 36,538 39,154 42,640 47,222 50,000
Tax relief for individuals: low income
9%
6,440
26%
17,435
68,000
2004/05
17%
8,435
20%
9,975
50,000
1998/99
15%Average rate
5,535Tax payable (actual tables)
15%Average rate
5,535Tax payable (94/95 tables)
37,000Income
1994/95
The annual income of a lower income individual in 1994/95 was increased in line with CPI.
Tax relief for individuals: middle income
20%
32,570
36%
58,165
163,000
2004/05
32%
38,635
33%
39,675
120,000
1998/99
30%Average rate
26,345Tax payable (actual tables)
30%Average rate
26,345Tax payable (94/95 tables)
89,000Income
1994/95
The annual income of a middle income individual in 1994/95 was increased in line with CPI.
Tax relief for individuals: high income
33%
159,870
41%
198,345
489,000
2004/05
41%
146,635
40%
142,875
360,000
1998/99
39%Average rate
102,455Tax payable (actual tables)
39%Average rate
102,455Tax payable (94/95 tables)
266,000Income
1994/95
The annual income of a higher income individual in 1994/95 was increased in line with CPI.
Trend – Corporate tax rates
1994/95 1995/96 96/97 - 98/99 99/00 - 04/05
Company rate 40% 35% 35% 30%STC 15% 25.0% 12.5% 12.5%Combined rate (100% distribution) 47.8% 48.0% 42.2% 37.8%Combined rate (33.3% distribution) 42.6% 39.3% 37.4% 32.6%
Growth in Revenuesince 1994
Total Tax Revenue (year on year growth)
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Fiscal Year
% g
row
th
Total Revenue 12% 16% 12% 12% 9% 9% 15% 12% 7% 10%
95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05
The growth in Total Tax Revenuesince 1994
Personal Income Tax (year on year growth)
0.0%
10.0%
20.0%
Fiscal Year
% g
row
th
PIT 11.9% 15.8% 12.2% 11.8% 8.9% 9.4% 14.5% 11.9% 7.5% 10.0%
95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 '04/05
The growth in Personal Income Taxsince 1994
Corporate Income Tax (year on year growth)
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
Fiscal year
% g
row
th
% growth 15.3% 20.2% 13.5% 5.4% -6.9% 40.6% 43.6% 31.6% 8.8% 13.4%
95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 '04/05
The growth in Corporate Income Taxsince 1994
Value Added Tax Collections (year on year growth)
0.0%
5.0%
10.0%
15.0%
20.0%
Fiscal year
% g
row
th
% growth 11.9% 9.6% 11.7% 9.7% 10.0% 12.6% 12.1% 14.9% 15.5% 10.5%
95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05
The growth in Value-Added Tax since1994
Customs duties (year on year growth)
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
Fiscal Year
% g
row
th
Customs 10.0% 16.7% -21.7% 7.3% 12.0% 21.4% 5.5% 10.8% -8.5% 19.0%
95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05
The collection of Customs Dutiessince 1994
Excise (year on year growth)
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Fiscal Year
% g
row
th
Excise 11.6% 2.4% 20.8% 7.0% 10.5% 3.7% 7.7% 8.5% 10.8% 10.3%
95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 '04/05
The growth in Excise Duties since1994
Revenue Budget2003/04
Budget estimates and revenue outcome: 2003/04
Revenue performance (including SDL andexcluding UIC)
!Printed estimate February 2003: R310 billion
!Revised MTBPS November 2003: R303,7 billion
!Revised Budget February 2004: R303,3 billion
Main budget estimates and revenue outcome:2003/04
2002/03-
Budget Revised Deviation 2003/04
R million estimate estimate % change
Personal income tax 96,714 98,200 1,486 4,1
Corporate income tax 65,820 60,650 (5 170) 8,8
Secondary tax on income 8,000 6,000 (2 000) (5,1)
Other taxes on income and 7,330 7,140 (190) (12,5)
profits
Skills development levies 3,600 4,000 400 19,3
Taxes on property 5,890 6,520 630 28,2
Value-Added tax 81,000 81,000 – 15.5
Specific excise duties 11,364 11,665 301 11.9
Levies on fuel 16,342 16,350 8 6.6
Other domestic taxes on 908 1,543 635 (7,9)
goods and services
Taxes on international trade 11,307 8,800 (2 507) (8,5)
and transactions
Stamp duties and fees 1,750 1,450 (300) (7,8)
Total tax revenue 310,025 303,318 (6 707) 7,5
Revenue: 2003/04
!Taxes above printed estimates:ÿPIT – R1.5 billion
ÿTaxes on property – R630 million
ÿSDL – R400 million
ÿExcise duties – R300 million
!Taxes on target:ÿVAT
ÿ Fuel levies
Revenue: 2003/04
!Taxes below printed estimates:ÿCIT – (R5.2 billion)
ÿSTC – (R2 billion)
ÿCustoms duties – (R2.5 billion)
ÿTax on retirement funds – (R350 million)
ÿStamp duties – (R300 million)
Revenue: 2003/04
!The revised tax revenue estimate for 2003/04 isR303,3 billion, an amount of R6,7 billion belowthe initial estimate
!This is attributed to:ÿ lower economic growth
ÿweak global demand for products
ÿstronger Rand exchange rates with other countries
ÿ the impact on corporate income tax and customsduties
Revenue Target
2004/05
2004/05
R333.7 billion
2003/04
R303.3 billion
Budget 2004/05tax issues
Key tax proposals
Key tax proposals
!PIT relief of R4 billion
!Increase in interest exemptions by R1 000
!Broad based employee equity participation withreview of equity based incentives for highly paid
!Removal of stamp duties on mortgage bondsand NCD’s
!Increase of transfer duty threshold to R150 000
!Eliminate duties on, e.g. recorded music, certaincosmetic products, watches, clocks and printers
Improving compliance
Improving compliance!Tax treatment of hybrid financial instruments
!Review of travel allowance provisions
!Reporting requirements for residential propertyholding entities
!Withholding tax on property sold by non-residents
!Sector by sector approach to investigate loweffective rates of tax
!Effective tax rates part of corporate governance
Improving compliance (continued)
!Stricter extensions policy
!Improving third party information quality
!Consider appropriate mechanism for regulationof tax practitioners
!Taxpayers will be required to inform SARS ofchanges in personal details
!Improved customs accreditation
!Sector by sector approach to investigating loweffective rates of tax
!Build critical audit and investigation capability
!Entrench risk profiling
!Improve supply chain management
!Ensure container security initiative (CSI)conformance
Improving compliance (continued)
Easing compliance
Easing compliance
!Further simplification of individual tax returns
!Emphasis on education in filing season
!Advance rulings legislation to be considered
!Task team to review administrative aspects ofsmall business interactions with SARS
!Launch of SARS Corporates’ Office
!New service centres in Pretoria-East andJohannesburg
Easing compliance (continued)
!VAT retail scheme to be introduced this year
!VAT deferment on duty-free goods intended forre-export
!Customs transformation
!e-Stamping system to be introduced
!Explore necessity of single business number
!Improving efficiency and quality of ouradministrative systems and procedures
!Separate processing pipelines based on risk andtype of taxpayer
!Increasing frontline capacity and skills
!Aligning back office and front office for optimalresolution
!Expanding call centres
Easing compliance (continued)
!Embedding prescribed service deliverystandards in terms of Taxpayer Charter
!Improving taxpayer feedback mechanisms
!Rolling out new capability inÿCustoms Manifest Acquittal System and EDI
ÿSARS Tax Administrator Single View
ÿSARS e-filing
Easing compliance (continued)
