Pravin Gordhan: Budget 2013
All the news from Finance Minister Pravin Gordhan's Budget Speech.
R1.9 billion over next three years for MeerKAT, SKA - Sapa
The Square Kilometre Array (SKA) and MeerKAT radio telescope projects have been allocated R1.9 billion over the next three years, according to the 2013 Budget tabled by Finance Minister Pravin Gordhan on Wednesday.
A large portion of the international SKA project - construction of which is expected to begin in 2016/17 - was awarded to South Africa and its eight African partner countries.
"In the period leading up to the start of construction, South Africa will build the 64-dish antennae radio telescope, MeerKAT."
The first MeerKAT antenna is scheduled for completion in the coming financial year (2013/14), while the full telescope and associated infrastructure is set for completion in 2016/17.
According to the budget document: "R1.9 billion has been allocated over the medium term [2013/14 to 2015/16] towards the SKA project, which includes MeerKAT."
Loss-making parastals facing restructuring - Sapa
Finance Minister Pravin Gordhan raised the spectre on Wednesday of restructuring loss-making parastatals, but ruled out privatisation.
In his budget review, Gordhan noted that a host of state-owned entities, from the national airline to Armscor and Alexkor, continued to lose money.
"Over the next year, government will work with SAA, SAX, Denel, the SA Broadcasting Corporation and the SA Post Office to develop sustainable long-term strategies, which may include some form of restructuring."
Gordhan was emphatic that this would not mean selling off state assets to the private sector, but rather a re-prioritising of state spending.
"It [privatisation] is not the issue...," he told a media briefing before delivering the 2013 budget.
"The bigger issue is if revenue continues to fall... We've got to look for other sources of income. The ready source of income is to cut expenditure, but this government will not continue to cut expenditure to the point where we impose austerity on our people."
Gordhan indicated that parastatals, many of whom had received lifelines in the recent past, would have a harder time securing funding from the Treasury.
"If we have been giving grants to a particular entity, we might decide they are no longer grants, they are loans, or we might decide from loans we might just go to guarantees, or we might decide that [if] x entity used to get on a very regular basis a certain amount of money, we might want to redirect that money."
"We will look at where are there assets that are owned by the state that could be better deployed in the cause of development in this country, rather than sitting in some space."
The estimates of national expenditure states that there will be "no transfer payments" to a host of state-owned entities over the medium term framework period. These include SA Airways (SAA), SA Express (SAX), Alexkor, Broadband Infraco, Denel, Eskom and Transnet.
In October, Gordhan gave SAA a R5 billion guarantee as the company reported a R1.25 billion annual loss, bringing its cumulative losses for the past eight years to R8bn.
The government backing was given on condition SAA presents a plan to return to profit by the end of March.
R6.5 billion extra for Water Affairs - Sapa
An additional R6.5 billion is set to flow into water affairs' coffers over the next three years, according to the 2013 Budget tabled by Finance Minister Pravin Gordhan on Wednesday.
It shows the department will receive a total of R38 billion over the 2013, 2014 and 2015 financial years, most of it earmarked for water infrastructure, and its implementation and support.
This is just over R6.5 billion more than the 2012 Budget estimate.
"The spending focus over the medium term will be on funding water infrastructure management, and regional implementation and support programmes for bulk water programmes."
This was aimed at accelerating the delivery of water to households, agriculture and industry.
Among so-called mega-infrastructure projects is the construction of the De Hoop Dam and associated bulk raw water distribution systems in Limpopo, and a R2.8 billion dam safety rehabilitation project, involving the 315 reservoirs owned by the department.
Another is the raising of the Clanwilliam Dam wall in the Western Cape.
According to the budget national expenditure document, the start of this project "has been pushed back due to delays in completing the feasibility studies".
Gordhan warns against tax avoidance - Sapa
Finance Minister Pravin Gordhan warned on Wednesday against tax avoidance and non-compliance.
Presenting his 2013/14 Budget in the National Assembly, he said millions of honest taxpayers in the country continued to sustain the growth and development agenda.
"To them we owe a debt of gratitude and, more importantly, a commitment to spend that money wisely, efficiently, and effectively. We thank you.
"We also owe it to our taxpayers to ensure they are not carrying the burden of those who benefit from our country's infrastructure and resources without paying their fair share of the costs," he said.
Around the world, taxpayers and their governments were challenging large multinational companies that paid little or no tax in the countries in which they operated.
The SA Revenue Service (Sars) was currently engaging with companies which had their base of operations in South Africa, but appeared to have shifted a large proportion of their profits to low tax jurisdictions, where only a few people were employed.
"This is unacceptable. Sars is also pursuing schemes identified under the revised general anti-avoidance rules, following several years' painstaking work tracing transactions through multiple jurisdictions and entities," Gordhan said.
These benefits typically accrued to advisors and pre-existing shareholders, rather than new shareholders who were introduced as the ostensible beneficiaries of the transactions.
On the temporary voluntary disclosure programme implemented under legislation enacted in 2010, which allowed taxpayers in default to regularise their tax affairs, Gordhan said more than 18,000 taxpayers had made use of the programme and tax of more than R3bn had been collected so far as a result of the programme.
From October 1, 2012, a permanent voluntary disclosure programme became effective as part of the Tax Administration Act.
Already, 700 taxpayers had come forward. Tax of more than R200 million would be collected before the end of March 2013.
Sars was also targeting other areas of non-compliance, including recipients of government spending who were not up to date with their taxes.
By working closely with the National Treasury and interfacing with the government payment system, Sars had identified companies which had received payments, but had not declared their full income.
"They are being audited, and others will follow. This intervention will be further underpinned by the reform of the Tax Clearance Certificate process which I announced in October."
In the near future, Sars would introduce a single registration process in which companies were able to register once-off in a simple manner for all tax types and customs activities, he said.
KZN gets biggest budget transfer - Sapa
KwaZulu-Natal receives the largest budget of all the provinces in terms of equitable share and conditional grants, according to the 2013 budget tabled on Wednesday.
The province would receive R88 billion for 2013/14, followed by Gauteng with R76.9 billion and the Eastern Cape with R59.6 billion.
Limpopo receives R48.5 billion, the Western Cape R41.7 billion, Mpumalanga R33bn and the North-West R27.7 billion.
The provinces with the lowest budget are Free State with R26bn and the Northern Cape with R12.3 billion.
A sum of R188 million had yet to be allocated.
In total, provincial government was allocated 43.5% of available revenue this financial year (2013/14), mainly for education, health and social welfare.
Local government has been allocated 8.9% of available funds (or R84.7 billion).
According to the 2013 Budget Review, a new formula for the local government equitable share was introduced and would provide more households with a subsidy for basic services.
"The threshold for receiving basic services rises from R800 per month (in 2001 prices) to R2 300 per month (in 2011 prices)," the review document stated.
"The formula also provides funds for the institutional costs of municipalities and for community services, such as parks and recreation and fire fighting."
In his speech in the National Assembly, Finance Minister Pravin Gordhan said the equitable division of revenue between provinces and municipalities took into account the 2011 census, which showed "substantial" shifts in the distribution and age of the population since 2001.
A map of the country in the Budget Review shows a sharp spike in population growth in urbanised provinces.
Gauteng had the biggest population growth spurt between 2001 and 2011, at 31%. The Western Cape saw a 29% increase in population growth in the same period.
Business confidence growing: Gordhan - Sapa
There is growing confidence in the business outlook, despite difficult conditions, Finance Minister Pravin Gordhan said on Wednesday.
Presenting his 2013/14 Budget in the National Assembly, he said growing the economy meant expanding business activity.
“We recognise the key role that private companies play in our economy,” he said.
Plans by business included construction and refurbishment by a company in the hospitality sector of R2.5 billion in the next 18 months, and expansion of R3 billion in the pipeline.
There were two telecommunications investments amounting to R14 billion this year, and capital spending of R3.4 billion over the next three years by a rail and logistics operator.
Also, a R2.5 billion expansion and longer-term plans of R15 billion in mining projects, and investment of R1.4 billion this year by a leading retailer, and plans to open 100 new stores by another.
Also planned was an expansion of R1.2 billion this year by a food and beverage sector firm, and plans for R28.5 billion in long-term infrastructure investment by a leading industrial company, which would create 10 000 temporary and 4 000 permanent jobs.
Gordhan said that in recent times, the world had become a more uncertain place for businesses, causing some to build cash reserves rather than invest in new or expanding operations.
“As government, we wish to encourage businesses to keep investing in our economy, and seize the opportunities around us.
“We are therefore reinforcing several initiatives that support business development.” These included: — The Manufacturing Competitiveness Enhancement Programme (MCEP) announced in 2012 had received a total of 215 applications with requests for grants totalling R2.3 billion mainly from the chemicals, metals, and agro-processing sectors.
Applications were expected to increase over the period ahead and funding of R1.5 billion per year had been provided on the budget of the trade and industry department;
— The Special Economic Zone (SEZ) Programme, also announced last year, had received funding to build world class industrial parks. Discussions were being held with Trade and Industry Minister Rob Davies on specific tax incentives to enhance this initiative;
— The Jobs Fund announced in the 2011 Budget had concluded two calls for proposals.
In total, 3 614 applications had been received, and 65 projects approved. Grant funding of R3.3 billion had been approved, matched by a further R3.1 billion in funding raised by the private sector; and,
— Small, medium and micro enterprises (SMMEs) played a key role in the development of the economy and were a significant generator of employment. Financing of SMMEs had been simplified with the creation of the Small Enterprise Finance Agency last year.
“We have been progressively working to simplify the tax requirements for small business.
“The turnover threshold will be increased this year and the graduated rate structure will be revised,” Gordhan said.
MPs cringe at hints of more tax - Sapa
There were moans and groans from MPs on Wednesday as Finance Minister Pravin Gordhan went off speech, telling them they should be paying more tax.
Delivering his 2013/14 budget, Gordhan said: "The government relies on resources derived from the wider economy, and the best way to generate resources is to grow the economy faster and increase the tax base...That means all of you must pay a little more tax."
Gordhan, dressed in a blue-grey suit and pink tie, looked more comfortable reading from a tele-prompter - which he seemed to struggle with during the 2009 Medium Term Budget Policy Statement, his first as Finance Minister.
The Minister's health did appear to have taken a slight knock, with him stopping his speech several times to cough, reaching for a sip of water to get him through the 32-page speech.
Gordhan started his speech seven minutes late, and during the first few paragraphs of the speech had to ask MPs to clap to "give everyone a bit of a break" at one stage.
Turning to a low carbon economy, he informed MPs of a carbon tax to be imposed on January 1st, 2015.
"I see minister (Edna) Molewa (Environmental Affairs minister) has a new car. I hope she will lend it to us...," he joked.
He was referring to four electric cars which Molewa's department would receive to use and test over the next three years.
Over 600 000 households to be electrified - Sapa
Treasury allocations to boost the number of electrified households will increase from R3.5 billion to R5.7 billion over the next three years, according to the 2013 Budget tabled on Wednesday..
The money will be used on infrastructure to ensure 645 000 households are connected to the electricity grid over this period.
Since President Jacob Zuma’s new administration took office in 2009, 475 157 homes had been connected to the grid.
Treasury allocates funds to the energy department, which in turn transfers the money to Eskom and municipalities to fund infrastructure for household electrification programmes.
From April 1 this year, a total of 200 000 households will be targeted for electrification each year for the next three years.
“Eighteen new bulk substations will also be built and 30 substations will be upgraded,” according to a budget document.
Eskom will be given R3.5 billion to install solar water geysers, while municipalities will receive R538 million to install energy efficient lighting and technologies.
Gordhan gives Sanral, Prasa more money - Sapa
Finance Minister Pravin Gordhan on Wednesday announced more funding for embattled transport agencies Prasa and Sanral to upgrade train services and national roads in his 2013/14 Budget.
The Passenger Rail Agency of South Africa will get roughly R5 billion over the next three years to fund plans to renew its fleet.
“The capital allocations to Prasa will ensure that the commuter fleet is renewed over a 10-year period from 2015/16 onwards and the necessary complementary allocations made,” according to the estimates of national expenditure tabled in Parliament.
The South African National Roads Agency will get an additional R156.2 million in the coming financial year, and roughly R1 billion a year for the following two years.
These allocations follow last year’s Treasury lifeline of R5.8 billion to Sanral after massive public opposition delayed the implementation of e-tolling to allow it to service debt on the Gauteng Freeway Improvement Project.
Labour unrest leads to weak output growth - Sapa
The total value of losses in mining production due to the crippling 2012 strikes has exceeded the R15 billion mark, the National Treasury estimates.
According to the 2013/14 budget review document, copper production fell by 21.8%, gold by 14.5%, and platinum by 12%.
Mining output was not expected to recover anytime soon.
“Delays in the resumption of full operations, shaft closures, and fraught labour relations could constrain output for a prolonged period,” the document said.
This had a knock-on effect on sectors closely linked to mining.
“Metal products — the largest component in manufacturing output — and the electrical machinery sector were the worst performers in 2012. Output in many sectors remains significantly below pre-recession levels.”
On the strike by farmworkers in the Western Cape, it was noted that while a 50% increase in wages would boost farmworker incomes it could also lead to job losses.
“The depth of labour frustrations in the mining and agricultural sectors is partly rooted in unsustainable economic and social conditions, sharpened by the rising cost of living.” For these sectors to prosper, employers and labour organisations had to make more concerted efforts to tackle concerns.
“More broadly, the events of 2012 have revealed weaknesses in South Africa’s collective bargaining system. Government, business, and labour have agreed to work together to strengthen the system of labour relations.”
NDP will slowly redirect spending - Sapa
Finance Minister Pravin Gordhan says the National Development Plan (NDP) serves as a point of departure for his new budget, but this means a gradual re-alignment of policy and resources rather than any sudden shifts in spending.
"The 2013 Budget marks the beginning of a process through which government departments and agencies will align their planning and expenditure to the NDP," he said in his budget review.
The next medium-term strategic framework would reflect government's plans over the next five years on implementing the NDP - a blueprint for reducing poverty and inequality by 2030.
Many of the NDP's aims had long been part of government's strategic planning, but it had failed to deliver due to a "lack of effective planning, inadequate state capacity, and the absence of clear lines of responsibility".
Gordhan singled out the economy, education and state capacity as priority parts of the plan.
In practice this meant speeding up land reform, reviewing the regulatory environment for small businesses, and expanding public employment programmes.
It would see the introduction of school inspectors, and steps to strengthen the accountability of heads of government departments and parastatals.
It was also imperative to improve the way the state ran strategic infrastructure projects and to tackle corruption, Gordhan said.
SOE underspend on infrastructure: Gordhan - Sapa
State-owned companies are still failing to spend enough of their budgets on key infrastructure projects.
According to the 2013 Budget Review, tabled by Finance Minister Pravin Gordhan on Wednesday, SOEs (state-owned enterprises) spent 70% of the R131.7 billion committed to infrastructure last year (2011/12).
This was an improvement on the previous year, where only 62% of that budget was spent.
“The shortfall against budget, however, was substantial, resulting largely from procurement and project implementation delays.” The document says that over the next three years, capital expenditure by SOEs is expected to reach R377.5 billion.
The majority of these infrastructure projects are in the energy (Eskom), transport (Transnet) and water sectors.
“Over the next three years, 43% of the funding required for infrastructure development by state-owned companies is expected to be raised in the debt markets, with the remainder coming from internally generated cash.” The need for private companies to “co-invest and bring technical expertise” to massive infrastructure projects is emphasised.
“An example of this approach has been the renewable energy independent power producer programme, which attracted R46.6 billion worth of investments from the private sector in 2012/13.”
No NHI tax expected in medium term - Sapa
It is unlikely that tax will be increased in the medium term to fund the National Health Insurance (NHI) scheme, Finance Minister Pravin Gordhan said on Wednesday.
"The initial phase of NHI development will not place new revenue demands on the fiscus," he said.
Tabling his 2013 Budget in the National Assembly, he told MPs: "Over the longer term, however, it is anticipated that a tax increase will be needed."
According to the 2013 Budget Review, National Treasury will work with the health department to determine the required funding for NHI.
A discussion paper inviting public comment on various options would be published later this year.
"The paper will also examine arrangements for risk and revenue pooling, mechanisms for the purchasing of health services -- including the size and cost of the proposed health benefits package -- and the mix of public and private provision of health care."
The NHI aims to ensure citizens are provided with essential health care, regardless of their employment status and ability to make a direct monetary contribution.
Last year, Health Minister Aaron Motsoaledi launched 10 pilot projects to assess various policy options for NHI.
The projects were set up in all provinces and covered 10 million people.
Conditional grant funding to the tune of R1.3 billion is helping to finance the projects.
The 2013 Budget provides for a new national health grant with two components -- one for NHI and one for health facility revitalisation.
The health department is to play a closer role in delivering these services alongside the provinces.
"This measure has been introduced to deal with underspending and weaknesses in the performance on these grants."
The new grant includes allocations of R291 million for 2013/14, R420 million for 2014/15 and R443.8 million for 2015/16.
The national health department will spend R370.6 million in the new financial year on the NHI and health financing sub-programme.
In 2012/2013, R182.1 million was spent on the sub programme.
By 2016, estimated spending on the NHI and related funding is expected to be about R546 million.
Decrease in US AIDS funding - Sapa
Additional allocations for HIV and Aids have been made in the 2013/14 Budget to offset decreased funding from the United States, it was revealed on Wednesday.
According to the 2013 Budget Review tabled in the National Assembly, the US President's Emergency Plan for Aids Relief programme had been contributing roughly R4 billion per year towards HIV and Aids and tuberculosis.
However, this amount was likely to decrease by 50% over the next five years.
As a result, R100 million had been allocated in 2014/15 and R384 million in 2015/2016 to partly offset the decreases.
In total, the national health department had budgeted R10.9 billion for HIV and Aids.
There was an additional allocation of R800 million for scaling up antiretroviral treatment in 2015/2016.
An estimated 1.7 million people infected with HIV and Aids received antiretroviral medication in 2012.
Mother-to-child transmission of HIV was projected to reduce from 3.5% to 2% in 2013/2014.
Health gets R133 billion budget - Sapa
The health department has been allocated a budget of R133.6 billion in the 2013/14 Budget.
Of this, R48.8 billion is for district, R26.4 billion for provincial, and R18.9 billion for central health services.
About R10 billion is earmarked for spending on health infrastructure.
Tabling his budget in the National Assembly on Wednesday, Finance Minister Pravin Gordhan said access to healthcare was a “vital element in the social wage”.
“There has been progress in reducing mortality and improving our HIV and TB (tuberculosis) programmes, and an expansion in medical and nurse training capacity is under way,” he said.
According to the Budget Review document, the country’s health indicators have improved significantly in recent years. The Medical Research Council has been allocated over R400m over the medium-term to support research, infrastructure, and projects for HIV/Aids, TB, and malaria.
The national health department’s goal is to reduce infant and child deaths as well as maternal mortality.
It will strengthen the training of doctors and midwives in obstetric emergencies in 25 priority districts this year.
It is hoping to increase the TB cure rate from 73% in 2011/2012, to 85% by 2015/2016.
Budget sends police back to basics - Sapa
The budget allocation for the police will prioritise basic crime fighting in coming years, Finance Minister Pravin Gordhan said on Wednesday.
“The spending focus over the medium term will be on providing basic policing services,” the 2013 budget states.
Gordhan announced that the bulk of the police department’s budget (R67.9 billion in 2013/14, rising to R75.8 billion by 2015/16 ) will go towards visible policing at police stations, in an effort to drive down crime rates.
“[The police budget] accounts for 46.6% of the department’s total budget owing to the labour intensive nature of policing.” According to the budget, this is designed to help the police service achieve clear targets in reducing serious and violent crime over the next three years. The aim is to reduce the number of contact crimes from 623,000 last year, to roughly 416,000 by 2015.
The police budget will also re-prioritise R2.5 billion over the next three years to strengthen detective and forensic services.
Gordhan set aside R154 billion for the security cluster in 2013, compared to R233 for education, sport and culture.
The budget allocation for the justice department forecasts boosting the capacity of the Public Protector and the Special Investigating Unit, but their actual annual allocations are set to grow at a slower rate than over the past three years.
According to the new budget, the two corruption-busting institutions’ collective number of investigators will increase from the current 515, to 711 in 2015.
Gordhan said this was in line with the National Development Plan’s call to strengthen the criminal justice system.
“The (justice) department will contribute to the plan’s goal of building a corruption free society by continuing to strengthen the investigative capacity of the Public Protector of South Africa and the Special Investigating Unit.” However, the spending estimates for the next three years show that after sizeable budget increases last year, funding for the Public Protector will grow by an average 8% annually, while that for the SIU will decline by more than 2% on average until 2015/16.
The budget allocation for the Asset Forfeiture Unit will also grow more slowly in coming years.
The budget provides for funding for Legal Aid South Africa to employ more legal representatives for the poor, and for an additional R108 million to set up more Thuthuzela care centres for rape victims.
Twenty additional centres will be established over the next three years as part of efforts to combat the abuse of women and children.
Over 400 000 houses to be delivered - Sapa
Over 400 000 additional low-income houses will be built by 2016, according to the 2013/14 Budget documents tabled in the National Assembly on Wednesday.
Transfers of funds would be made to provinces and municipalities through grants to accelerate the delivery of such housing and basic services to households.
These transfers would allow for an additional 409 143 houses and upgrades to over 198 000 sites in informal settlements over the medium-term.
"The projected growth in the delivery of low-income houses is slower than the projected growth in expenditure over the medium-term due to increasing construction costs and a shift in focus towards providing access to secure tenure and basic services," the document states.
Between 1994 and the end of last year, government built 2.7 million houses for low-income families.
Housing development had a budget of R31.9 billion for the new financial year.
Providing housing for low-income groups remained a major policy objective, according to the 2013 Budget Review.
Over the medium-term, government had allocated R30.3 billion to upgrade informal housing in metropolitan municipalities and R1.1 billion for rapidly urbanising mining towns.
It would also provide R3 billion for medium-density rental housing in urban areas in this period.
About 6 000 additional medium density rental housing units were expected to be built in designated restructuring zones in cities and large towns, for households with a monthly income of between R1 500 and R7 500.
Sin taxes, fuel levies go up - Sapa
Smokers and drinkers will have to cough and splutter up more for their vices, according to the latest budget proposals.
Beer drinkers will pay seven cents more for a 340ml can.
A bottle of wine will cost 15 cents more, while the price of ciders and alcoholic fruit beverages is set to rise seven cents a litre.
A 750ml bottle of spirits will cost R3.60 more from April 1.
Those who prefer traditional African beer will, however, not be digging deeper into their pockets.
Motorists will feel the pinch again this year, paying a total of 23 cents a litre more for petrol from April 3.
The general fuel levy will go up by 15 cents a litre, with an additional eight cents a litre going to the Road Accident Fund.
For the first time in four years, shoppers are going to have to pay more for plastic bags.
The levy on plastic shopping bags goes up from four cents to six cents this year.
The environmental levy on incandescent light bulbs will also go up a rand, to four rand a bulb.
Those purchasing e-books or downloading music will also be affected.
The SA Revenue Service will require all foreign businesses supplying these services in South Africa to register as VAT vendors.
"In the case of imported services or digital supplies, such as e-books or music, no border post or post office can perform the function as collecting agent, as is the case with physical goods," according to the 2013 Budget Review.
The document says this means consumers are buying services on websites without paying VAT.
Treasury says the new proposals will bring South Africa in line with international trends.
It cites regulations adopted by the European Union, which state that those supplying digital goods must register for VAT in the country where consumers reside.
R7 billion tax relief for individuals - Sapa
Individuals will benefit from R7 billion in personal income tax relief, together with adjustments to the medical tax credit and other monetary thresholds amounting to about R350 million, Finance Minister Pravin Gordhan announced on Tuesday.
Tabling his 2013 Budget in the National Assembly, he said that over the past decade, the tax base had been steadily broadened, both through policy reforms and improved revenue administration.
This had made substantial tax relief possible, contributing both to household disposable income and a lower cost of doing business.
Other tax proposals for 2013 included reforms to the tax treatment of contributions to retirement savings, an employment incentive through the tax system for first-time job seekers, and further tax relief for small businesses, including an increase in the monetary tax thresholds applicable for small business corporations.
Gordhan said a review this year would assess the tax policy framework and its role in supporting the objectives of inclusive growth, employment, development, and fiscal sustainability, among other things.
This year, an automated tax clearance system would be implemented, and the policy paper on carbon emissions published with the view of introducing a carbon tax from 2015, he said.
According to the budget review document, also tabled on Wednesday, individuals whose taxable income is from one employer and below R250 000 a year will not have to submit income tax returns.
The primary rebate for individuals increases from R11 440 to R12 080.
The tax threshold for people below 65 years rises from R63 556 to R67 111; for those 65 and over, from R99 056 to R104 611; and, for those over 75, from R110 886 to R117 111.
Monthly tax credits for medical scheme contributions will be increased from R230 to R242 for the first two beneficiaries, and from R154 to R162 for each additional beneficiary, with effect from March 1.
Tax relief for small businesses included increasing the R14 million turnover threshold for small business corporations to R20 million, and a revision of the graduated tax structure for such corporations.
Regarding public benefit organisations (PBOs), the review states that donations to PBOs working in the areas of welfare and humanitarian activities, health care, education, conservation, environmental protection, animal welfare, and land and housing are currently deductible up to 10% of taxable income in the year the donation is made.
Donations in excess of this figure cannot be carried forward, which reportedly discourages large donations.
Government proposes to allow donations in excess of 10 percent of taxable income in any given year to be rolled over as allowable deductions in subsequent years.
Also under consideration are rules governing the amount of funding that must be distributed where PBOs provide funding to other PBOs.
Carbon tax to be introduced from 2015 - Sapa
A carbon tax will come into effect from 2015, Finance Minister Pravin Gordhan announced on Wednesday.
"Government proposes to price carbon by way of a carbon tax, at the rate of R120 per ton of CO2 equivalent, from January 1, 2015," he told MPs.
Tabling his 2013 Budget in the National Assembly, he said the impact of this would be softened by a tax-free exemption threshold of 60%, "with additional allowances for emissions intensive and trade-exposed industries".
An updated carbon tax policy paper would be published at the end of next month, Gordhan said.
According to proposals in the 2013 Budget Review, the basic tax-free threshold of 60% will apply during the first phase of the implementation of carbon tax - from 2015 to 2020.
The document says also under consideration is a "gradual phasing out" of the electricity levy as the carbon tax is phased in.
Other environmental taxes in the 2013 Budget will see fuel levies increase by 23 cents a litre from April 3 this year.
On that date, the general fuel levy will rise by 15 cents a litre, to R2.13, while the Road Accident Fund levy will increase by eight cents a litre, to 96 cents a litre of petrol.
The levy on plastic shopping bags will rise from four cents to six cents a bag from April 1.
The levy on incandescent light bulbs - introduced in 2009 - will be increased from R3 to R4 a bulb from April 1.
The tax on motor vehicle carbon dioxide emissions is also set to rise. The tax is aimed at encouraging the purchase of vehicles with lower emissions.
From April 1, the emissions tax on passenger cars will rise from R75 to R90 for every gram of emissions per kilometre above 120g CO2/km.
In the case of double-cab vehicles, it will increase from R100 to R125.
Rules on tax incentives that encourage biodiversity management are to be modified.
The 2013 Budget Review says government is looking at modifying the rules concerning the allowable deductions for setting aside private land as a protected area.
"The limitation of not allowing a rollover of donations in excess of 10 percent of taxable income will be scrapped".
It notes that where land has been owned for many years, the original cost of the land is generally much lower than its current market value.
"Presently, the incentive is calculated using the lower of cost or market value of the protected area for 99-year contracts.
"Government proposes that the value for the purpose of this incentive should be the lower of the municipal or market value."
Capital gains would be triggered, "but the taxable portion of these gains will be set off against the deduction allowed over a period".
Further, certain conservation capital and maintenance spending "will be allowed as deductible tax expenses".
The 2013 Budget Review further proposes incentives to support the development of a local biofuels industry.
The South African biofuels strategy proposes the establishment of eight manufacturing plants.
"As in other countries, a fiscal incentive is required to overcome the initial capital cost hurdles and offset risks."
The document says the initial cost of the incentive "will be 3.5 cents a litre to four cents a litre of petrol or diesel, recovered through a levy included in the monthly price determination".
New tax proposals on retirement funds - Sapa
Employer contributions to employee retirement funds will be treated as a taxable fringe benefit in the hands of the employee from March next year, Finance Minister Pravin Gordhan announced on Wednesday.
Tabling his 2013 Budget in the National Assembly, he said individuals would be allowed, from that date, to deduct up to 27.5% of the higher of taxable income or employment income, for contributions to pension, provident and retirement annuity funds.
The maximum annual deduction would be R350 000. Contributions above the cap would be carried forward to future tax years.
Gordhan said tax-preferred savings and investment accounts would be introduced in 2015.
Retirement funds would be required to identify appropriate preservation funds for exiting members, who would be encouraged to preserve their pensions when changing jobs.
Retirement funds would be required to guide their members through the process of converting savings into a regular income after retirement, and to choose or establish default annuity products that met appropriate principles and standards.
More competition would be promoted by allowing providers other than life offices to sell living annuities.
The tax treatment of pension, provident, and retirement annuity funds would be simplified and harmonised.
Governance reforms of retirement funds would also be implemented, with measures in place to ensure trustees of retirement funds were trained once they had been appointed.
"I intend to call up a conference of all trustees this year to take this process forward," Gordhan said.
"We are also considering how to encourage all employers to provide appropriate retirement mechanisms for their employees, as part of the broader social security reforms," he said.
According to the 2013 Budget Review, also tabled on Wednesday, tax treatment of contributions to pension, retirement annuity, and provident funds will be harmonised, allowing provident fund members to receive a tax deduction on their own contributions.
Vested benefits will be protected: balances in provident funds at the date of implementation, and subsequent growth, will not be required to be annuitised.
However, subject to public consultations, future contributions made to provident funds after an agreed date will be subject to the same annuitisation requirements applicable to retirement annuity and pension funds.
This requirement will not apply to provident fund members older than 55 years at the date of implementation.
New employees can still join and contribute to existing provident funds, and new funds can be created subject to the same tax and annuitisation rules.
This will reduce the complexity of the retirement system significantly.
Contributions in excess of the annual caps may be rolled over to future years.
At retirement, where any non-deductible contributions remain, they will be set off against any lump sum or annuity income before tax is calculated, to avoid double taxation.
Specific provisions will need to be made for defined-benefit pension plans and will require further engagement with industry, it states.
Gordhan mum on mining taxes - Sapa
Finance Minister Pravin Gordhan stressed on Wednesday that mining was a cornerstone of the South African economy, and refused to comment on the rumoured increase in mining taxes.
He said the devastating impact of disruptions in the mining sector last year on the country’s deficit showed it was imperative mining operations ran smoothly, and acknowledged industry concerns about shifting demand, rising power prices and “licencing issues”.
In a highlighted text box in the budget review document, the minister said mining needed a supportive policy climate and a stable regulatory framework.
Speaking to journalists at Parliament, he dismissed suggestions that this was at odds with recent remarks by government leaders — ranging from Mineral Resources Minister Susan Shabangu to President Jacob Zuma — that have set the industry bracing for higher mining royalty taxes.
“Nothing that does not appear in this box is relevant today.
That is the short and simple answer, and we reiterate as you did that mining is a very important part of our economy,” he told a media briefing.
“It employs hundreds of thousands of people, mineral exports are almost 50% of our exports and, as you can see, they impact our current account deficit if the exports go awry.
“But we also understand that mining today faces a new structural environment... because the demand patterns have changed around the world.” Gordhan said mining houses and other roleplayers had to take into account these changes, alongside the labour unrest that led to the Marikana shooting last August.
Shaft closures and prolonged labour unrest could constrain both output and the general economy.
Gordhan stressed that strife in the mining industry has directly contributed to a bigger deficit, estimated to be 5.2% of GDP in 2012/13, because it resulted in a revenue shortfall of R16.3 billion.
“The key is that we need to get miners to start mining, and ensuring that they make their fair contribution to the economy and to all aspects of the economy.”
Gordhan confirmed that the review of South Africa’s tax regime, which was announced by Zuma in his state of the nation address this month, would include mining taxes.
“We will look at both the issue of taxation in the mining industry and other relevant tax issues that impact upon growth, employment and development in South Africa and inform us and guide us.”
The minister announced that the tax review committee would be headed by Judge Dennis Davis. He said its terms of reference and other members would be announced in due course.
Programme aims to create 3.7 million jobs - Sapa
Government is aiming to create 3.7 million jobs in the next phase of its Expanded Public Works Programme.
Two million of these will be full-time jobs, according to targets set out in the 2013 Estimates of National Expenditure, tabled by Finance Minister Pravin Gordhan on Wednesday.
The programme would continue to be allocated more resources to speed up the state's involvement in creating work for the country's unskilled and unemployed.
For the upcoming financial year (2013/14), a target had been set to reach 1.2 million jobless South Africans.
According to the document, the new phase of the project will focus on "non-state sectors" such as public bodies and non-governmental organisations.
"The department (of public works) has re-prioritised R248 million over the MTEF (medium-term expenditure framework) period from transfers to provinces and municipalities to... the non-state sector as follows: R80.2 million in 2013/14, R87.7 million in 2014/15, and R79.7 million in 2015/16."
The bulk of the money will be spent compensating those participating in the programme, and acquiring related goods and services.
Tax incentives for youth jobs - Sapa
Tax incentives to employ young people and for people employed in the special economic zones (SEZs) are on the cards.
Tabling his 2013 Budget in the National Assembly on Wednesday, Finance Minister Pravin Gordhan said a revised youth employment incentive would be tabled in the National Assembly, together with a proposed employment incentive for SEZs.
According to the 2013 Budget Review, the number of youths without jobs remains exceptionally high, with more than 40 percent of those under the age of 30 unemployed.
Low levels of demand, lack of experience and a lack of appropriate skills and networks were among the reasons young people struggled to find work.
To date, interventions to encourage the private sector to hire younger workers had proven inadequate.
The national development plan (NDP) suggested a range of policies to help young people find work.
According to the budget document, government's existing approach to increasing employment focused on training, skills development, labour market activation, and short-term public employment.
Programmes in support of these objectives included sector education and training authorities, further education and training colleges, small enterprise support, the Industrial Policy Action Plan, the expanded public works programme, and the community work programme.
To complement existing programmes, a youth employment tax incentive, aimed at encouraging firms to employ young work seekers, would be tabled for consideration by Parliament.
The administratively simple incentive would create a graduated tax incentive at the entry-level wage, falling to zero when earnings reached the personal income tax threshold.
The introduction of this tax incentive, which took into account the concerns of organised labour, would help young people enter the labour market, gain valuable experience, and access career opportunities.
Protection provided by existing labour legislation, combined with oversight by the SA Revenue Service and the labour department, would avoid displacement.
A similar tax incentive would be made available to eligible workers of all ages within SEZs, the review stated.
According to the review, these included that in certain SEZs, a 15% corporate income tax rate would be authorised for businesses in such areas, as well as an employment incentive allowing for a tax deduction for employing workers earning less than R60 000 per year.
Also, an accelerated depreciation allowance for buildings in these areas, based on the existing regime for urban development zones, to encourage developers to invest more in industrial premises.
Gordhan said the SEZs programme, announced last year, had received funding to build world-class industrial parks.
"I am in discussion with [Trade and Industry] Minister [Rob] Davies on specific tax incentives to enhance this initiative," he said.
Old age test to be phased out - Sapa
All elderly people will be eligible for an old age grant regardless of income or assets, Finance Minister Pravin Gordhan said on Wednesday.
Tabling his 2013 Budget in the National Assembly, he told MPs: “It is... proposed that the old age grant means test should be phased out by 2016.”
At present, a means test is used to check whether an applicant over the age of 60 is eligible for assistance from the state.
The test requires the applicant not earn more than R49 920 a year, and have assets worth not more than R831 600 if single.
If married, it requires a maximum combined income of R99 840 a year, and a combined asset value of not more than R1,7 million.
Gordhan said that from 2016, “all citizens over a designated age will be eligible for the grant”.
This would simplify its administration and “address the disincentive to save that arises from the present means test”.
He also said it would prevent the exclusion of vulnerable individuals.
“Adjustments to personal income tax rebates will partially offset the costs of this reform, and will ensure that the overall incidence of tax and income support arrangements remains distributive.”
To receive the grant, an applicant had to be a citizen or permanent resident, live in the country and not be cared for in any state institution.
As at September last year, 2.8 million people were receiving old age grants.
Gordhan said old age, war veteran, disability and care dependency grants would increase from R1 200 to R1 260 a month.
The foster care grant would increase from R770 to R800 a month.
The child support grant would increase to R290 in April this year, to R300 a month in October this year.
The Government Employees Pension Fund had remained fully funded despite the turmoil in financial markets in recent years.
A 6% increase in civil service pensions would be effected in April this year, he said.
According to the 2013 Budget Review, tabled on Wednesday, the social development department is looking at ways to improve income support for orphaned children who live with the relatives.
The aim is to finalise the development of such a policy by the end of the financial year.
The department’s budget for the financial year would increase to R120 billion.
Chief procurement office coming soon - Sapa
The process of setting up a chief procurement office (CPO) in the National Treasury has begun in earnest, Finance Minister Pravin Gordhan said on Wednesday.
Tabling his 2013 Budget in the National Assembly, he said the name of a chief procurement officer would be announced soon,
A project team, seconded from state agencies and the private sector, had already identified four main streams of work.
These involved immediate remedial actions, improving the current system, standardising the procurement of critical items across all government departments, and the long-term modernisation of the entire system.
Among the first initiatives of the CPO would be to enhance the existing system of price referencing.
This would set fair value prices for certain goods and services.
Secondly, it would pilot procurement transformation programmes in the departments of health and public works, nationally and in the provinces.
"National Treasury is currently scrutinising 76 business entities with contracts worth R8.4 billion, which we believe have infringed the procurement rules, while SARS (SA Revenue Service) is currently auditing more than 300 business entities and scrutinising another 700 entities," Gordhan said.
The value of these contracts was estimated at over R10 billion. So far 216 cases had been finalised, resulting in assessments amounting to over R480 million being raised.
The Financial Intelligence Centre had referred over R6.5 billion for investigation linked to corrupt activities.
Gordhan said he fully supported calls for appropriate curbs on officials doing business with government.
To complement this, the Public Finance Management Act would be aligned with the provisions of the Public Service Act.
Worldwide, special measures were being taken to oversee the accounts of what had become known as "politically exposed persons" -- public representatives and senior officials.
"I have asked that the FIC should explore how we might bring South Africa into line with these international anti-corruption and anti-money laundering standards.
"Taxpayers, and indeed all South Africans are understandably impatient for tangible change," he said.
In the present system, procurement transactions took place at too many localities and the contracts were short-term.
Consequently, there were hundreds of thousands of transactions from a multitude of centres.
"There is very little visibility of all these transactions. While our ablest civil servants have had great difficulty in optimising procurement, it has yielded rich pickings for those who seek to exploit it.
"There are also too many people who have a stake in keeping the system the way it is."
Government's solutions, hitherto, had not matched the size and complexity of the problem.
"As much as I want, I cannot simply wave a magic wand to make these problems disappear. This is going to take a special effort from all of us in government, assisted by people in business and broader society.
"And it will take time. But we are determined to make progress," Gordhan said.