There probably won't be any big tax surprises in the Budget Minister of Finance Trevor Manuel presents to parliament next month, says Deloitte & Touche tax partner Chris Beneke.
Speaking at the Seeff Trust-Weekend Argus Investors' Club in Cape Town this week, Beneke said Manuel could not afford to surprise the financial markets with major changes.
He was more likely to want to create an impression of financial stability.
Beneke said a capital gains tax was unlikely to be introduced in this Budget.
He pointed out that the government depended on income tax of R80 billion and VAT of R37 billion to make up most of its R124 billion in revenue.
Most of the income tax (R58 billion) came from individuals and trusts, leaving Manuel little room for manoeuvre. A slight easing of personal income tax was a possibility, he said.
But this would have to be offset by a higher VAT rate, he said, and Manuel was under pressure from the trade unions not to lift VAT.
Manuel might comment on the next report of the Katz Commission in his budget speech, Beneke said.
The Katz report was expected to tackle:
* Changes to the source basis of taxation, so that the Receiver of Revenue can collect tax on offshore interest and royalties, if exchange controls are lifted;
* The use of trusts to freeze the estate of taxpayers;
* Adjustments to donations tax and estate duty rates;
* Recommendations that neither employers nor employees receive tax relief for medical aid contributions, or recommendations that employees are liable for fringe benefits tax if employers only contribute to medical aids. This would give the Minister of Health additional funds to upgrade the health system;
* Secondary tax on companies, likely to remain in force until some other tax on dividends was introduced;
* Tax incentives for small business, in a bid not only to ease the administrative burden on these enterprises, but also to draw them into the tax net;
* Movement on the 0,5 percent marketable securities tax on share transfers;
* Tax incentives for special interest groups;
* Training allowances;
* Land tax; and,
* Taxation of the retirement funding industry.
The current 17 percent interim tax levied on the income of retirement funds was likely to remain in force, Beneke said, until the proposals of the Katz and Smith commissions were reconciled in consultation with the industry and the revenue authorities.
On capital transfer taxes, he said the Katz Commission might identify three ways to attack the use of trusts:
* By imputing an interest rate on the interest free loan made by the tax planner to the trust, and raising tax on the notional interest;
* By levying estate duty when the assets were handed out by the trust; or,
* By taxing the trust's assets every few years, either at an estate duty rate of 25 percent or at another rate.
Until legislation was changed, Beneke said, taxpayers should continue to use trusts. But anyone considering the formation of a trust should wait until after the March 12 Budget. Anyone using a trust should consider a flexible trust deed to allow for future changes.
Beneke said money should not be spent now on transferring fixed property into trusts and paying transfer duties of 10 percent, though new properties could be placed in a company controlled by a trust.