The Minister indicated that since the 2022 Budget, revenue collection has exceeded projections and the gross tax revenue estimate for 2022/23 has been revised upwards by R83,5 billion, to R1,68 trillion. It was indicated that the reasons for this higher estimate are largely the improvements made in corporate income tax collections, with strong receipts from the finance and manufacturing sectors. What is interesting about this is that the amendments to the Income Tax Act 58 of 1962 that came into effect earlier this year, specifically the reduction of the corporate income tax rate to 27% and concomitant interest deductibility and limitation of assessed losses amendments, were aimed at broadening the corporate tax base. It is thus possible that the increased projection is based on the amendments having the desired effect, although it remains to be seen whether these amendments will adversely affect taxpayers and their businesses, especially those operating in industries and sectors where it takes a number of years to become profitable.
Taxation Laws Amendment Bill and Tax Administration Laws Amendment Bill
The Minister tabled the Taxation Laws Amendment Bill, 2022 (2022 TLAB) and Tax Administration Laws Amendment Bill, 2022 (2022 TALAB) before Parliament, following the public consultation process that took place in relation to draft versions of the bills that were published earlier this year. Following the public consultation process, the following notable changes have been included in the bills:
- Regarding the carbon tax proposed amendments, it appears that only some of the submissions made by stakeholders were accepted. Most notably, the revised 2022 TLAB now sets out the exact rate for each carbon tax year of assessment from now until 2030, although these rates are lower than those proposed in the draft version of the bill.
- In relation to business tax amendments, the most notable changes relate to the provisions regarding contributed tax capital (CTC), where changes have been introduced to ensure an equal and proportionate distribution of CTC per share whilst not impacting on certain legitimate targeted corporate actions.
- Regarding value-added tax (VAT), there were not many changes, but those that were made relate mainly to proposals following the 2019 amendments to section 72 of the Value-Added Tax Act 89 of 1991, which dealt with the issuing of VAT rulings.
- From a tax administration perspective, the 2022 TALAB has been amended to take into account comments regarding the imposition of understatement penalties in the context of the employment tax incentive and regarding the provisions aimed at preventing abuse of the tax compliance status system.
The 2022 TLAB and 2022 TALAB will now be considered by the relevant parliamentary committees and once they have been passed by Parliament, they will be signed by the President and come into effect on promulgation in the Government Gazette. Taxpayers should note that some of the provisions in the bills apply retrospectively (to periods prior to promulgation) and should therefore understand and appreciate how this may impact them.
We will also discuss some of the amendments in our Tax and Exchange Control Alert in the coming weeks and months.