Taxation: Week 1
What is taxation?
¥ Means whereby the state collects funds which pays for
o Administration
o Benefits provided to residents
*Professional accountants must update their taxation knowledge in order to
identify tax planning opportunities for taxpayers, in order to reduce their tax
burden
¥ A professional accountant must be able to
o Prepare a tax computation
o Predict the tax consequences of an anticipated transaction
o Suggest tax-efficient alternatives to achieve a desired business outcome
SAICA Competency framework
¥ A chartered accountant contributes to the team by being competent in
o Calculating the taxable liabilities of various taxpayers
o Identifying a taxpayer9s compliance and reporting requirements
o Developing and implementing an individual9s or entity9s tax planning
strategies
Maxims of taxation
1. Equity
¥ Everyone must contribute towards the support of the government in
proportion to their income
2. Certainty
¥ The tax to be paid by each individual must be certain, not arbitrary
¥ Person needs to know amount to be paid to SARS
3. Convenience
¥ Taxes must be levied in such a manner and at the time most convenient to
the contributor (i.e. taxpayer)
4. Economy
¥ The collection cost of taxes must be as low as possible
Flat tax system Progressive tax system Regressive tax system
Every person in the country The tax percentage is paid The higher the income,
pays the exact same tax according to the income the lower the tax % in
rate 3 regardless of their bracket - % tax increases as proportion to income
income bracket income increases earned - % tax decreases
¥ Normal tax in SA as income increases
*same proportion of tax is ¥ Highest pays 45% ¥ VAT in SA
paid relative to the income ¥ Lowest pays 18%
of individuals
, Role players influencing the tax landscape
1. Legislation
¥ Tax is rule based, thus the rules (regarding tax) outlined legislation must
be followed
2. Parliament
¥ National legislature has the power to appeal, pass or abolish certain laws
pertaining to tax
3. SARS
¥ South African Revenue Services collects the tax revenue and ensures
compliance with tax laws
¥ Acts on behalf of the national treasury
¥ Administrator of funds
4. National treasury
¥ Manages government finances and nation economic policy
¥ Prepares annual budget
¥ Minister of finance 3 Tito Mboweni
5. Professional bodies
¥ SAICA, SAIPA, SAIT 3 some members are registered as tax practitioners
(offer assistance to public)
6. South African review committees
¥ Review SA9s tax policy framework
¥ Assess whether the policies support the objectives of inclusive growth,
employment, development and fiscal sustainability
7. Taxpayers
¥ Most important
¥ Individuals, companies, SMEs, brokers, financial institutions etc.
8. International tax policy organisations
¥ IMF, WB, OECD, ATAF
South African tax legislation
¥ Administered by the Commissioner of SARS
¥ Income Tax Act 58 of 1962
¥ VAT Act 89 of 1991
¥ Estate Duty Act of 1955
Annual budget
¥ Minister of finance presents annual budget to the Parliament
¥ Total expenditures of the government for the fiscal year is announced + how
those funds will be administered
¥ Expenditure mainly funded by taxation (balance is funded by loans and sundry
gov funding)
¥ Fiscal year 3 1 April to 31 March of the following year
What is taxation?
¥ Means whereby the state collects funds which pays for
o Administration
o Benefits provided to residents
*Professional accountants must update their taxation knowledge in order to
identify tax planning opportunities for taxpayers, in order to reduce their tax
burden
¥ A professional accountant must be able to
o Prepare a tax computation
o Predict the tax consequences of an anticipated transaction
o Suggest tax-efficient alternatives to achieve a desired business outcome
SAICA Competency framework
¥ A chartered accountant contributes to the team by being competent in
o Calculating the taxable liabilities of various taxpayers
o Identifying a taxpayer9s compliance and reporting requirements
o Developing and implementing an individual9s or entity9s tax planning
strategies
Maxims of taxation
1. Equity
¥ Everyone must contribute towards the support of the government in
proportion to their income
2. Certainty
¥ The tax to be paid by each individual must be certain, not arbitrary
¥ Person needs to know amount to be paid to SARS
3. Convenience
¥ Taxes must be levied in such a manner and at the time most convenient to
the contributor (i.e. taxpayer)
4. Economy
¥ The collection cost of taxes must be as low as possible
Flat tax system Progressive tax system Regressive tax system
Every person in the country The tax percentage is paid The higher the income,
pays the exact same tax according to the income the lower the tax % in
rate 3 regardless of their bracket - % tax increases as proportion to income
income bracket income increases earned - % tax decreases
¥ Normal tax in SA as income increases
*same proportion of tax is ¥ Highest pays 45% ¥ VAT in SA
paid relative to the income ¥ Lowest pays 18%
of individuals
, Role players influencing the tax landscape
1. Legislation
¥ Tax is rule based, thus the rules (regarding tax) outlined legislation must
be followed
2. Parliament
¥ National legislature has the power to appeal, pass or abolish certain laws
pertaining to tax
3. SARS
¥ South African Revenue Services collects the tax revenue and ensures
compliance with tax laws
¥ Acts on behalf of the national treasury
¥ Administrator of funds
4. National treasury
¥ Manages government finances and nation economic policy
¥ Prepares annual budget
¥ Minister of finance 3 Tito Mboweni
5. Professional bodies
¥ SAICA, SAIPA, SAIT 3 some members are registered as tax practitioners
(offer assistance to public)
6. South African review committees
¥ Review SA9s tax policy framework
¥ Assess whether the policies support the objectives of inclusive growth,
employment, development and fiscal sustainability
7. Taxpayers
¥ Most important
¥ Individuals, companies, SMEs, brokers, financial institutions etc.
8. International tax policy organisations
¥ IMF, WB, OECD, ATAF
South African tax legislation
¥ Administered by the Commissioner of SARS
¥ Income Tax Act 58 of 1962
¥ VAT Act 89 of 1991
¥ Estate Duty Act of 1955
Annual budget
¥ Minister of finance presents annual budget to the Parliament
¥ Total expenditures of the government for the fiscal year is announced + how
those funds will be administered
¥ Expenditure mainly funded by taxation (balance is funded by loans and sundry
gov funding)
¥ Fiscal year 3 1 April to 31 March of the following year
