Professor Michael Katz, who heads the taxation commission, answers some questions about future taxation plans.
Is tax going to get worse and why?
"We are very committed to getting internationally competitive rates of tax. Our corporate tax rate is now in line with the rest of the world and we would like the maximum marginal rate of tax on individuals at 35 percent. When we have internationally competitive rates of tax it will affect business decisions less and there will be a lower incentive to avoid and evade. We are also on record as saying we are in favour of broader bands and the threshold for the top rate of tax should be at a higher level."
It appears as if the R120 000 tax-free lump-sum on retirement has been reneged upon?
"Most of the recommendations we have received say the EET system (tax deductibility of contributions, tax-free build up and full tax on payout) should be preserved. With this there is little justification for a R120 000 tax-free.."
Are there plans to make any recommendations to index tax rates and allowances for inflation?
"Firstly, the higher the rate of tax, the less significant the allowances. The Commission is keen to broaden the tax base and eliminate allowances. Secondly, we are aware of the problems of bracket creep and in our first report said it was unacceptable. We are trying to address that with broader marginal bands. Thirdly, the thinking around the world is not to accommodate inflation, but to fight it."
Lump sum taxation is quite high. Will you give members of retirement funds a window of opportunity to use the present legislation?
"Obviously the rate is important and it depends on the incentives to go for pension rather than capital. We have said throughout our report to try and preserve existing positions. Really this is government's call."