|All amounts in R million||1996/7||1997/8||1998/9||1999/2000||2000/1||2001/2||2002/3||2003/4||2004/5||2005/6|
|Collections (excluding SDL and UIF)||147 077||165 256||185 027||200 959||219 077||249 581||278 858||298 612||350 537||413 202||451 186|
|Expenditure||1 107||1 225||1 934||2 317||2 529||2 863||3 502||3 792||4 603||4 254||4 846|
|Expressed as a percentage of collections||0.75%||0.74%||1.05%||1.15%||1.15%||1.15%||1.26%||1.26%||1.31%||1.03%||1.07%|
SDL and UIF are excluded from collections for the purposes of this analysis since SARS is separately remunerated by the institutions concerned for collecting these amounts. It is a little known fact that, unlike a Government Department, SARS was registered for VAT and that the expenditure above included a VAT charge to Government. From 2005/6 SARS is no longer required to pay over output VAT but is, equally, no longer able to claim input VAT. Without analysing SARS' financial statements for each of the years, the likely effect is that the percentage for 2005/6 is slightly lower than that for 1999/2000 - 2001/2.
SARS generally uses Adobe's portable document format (PDF) when publishing documents to its web site. This format is widely used on the web since its specifications are readily available and it, therefore, has readers on a wide variety of operating systems. SARS has, however, published some documents using Microsoft Office's proprietary formats, particularly Microsoft Word. This may present something of a problem for people who do not own Microsoft Office. All is not lost, though.
Another office suite/word processor/etc. you already have installed may have the ability to import Microsoft formats. Save the document from your web browser and try opening it. If you don't have one installed or it is battling to cope with the document, you may wish to try downloading and installing the open source office suite from OpenOffice.org. I have found it handles the Microsoft Word and Powerpoint documents I have thrown at it with a high degree of accuracy. Finally, you could try downloading and installing a viewer from Microsoft. This last is not an option if you are running an operating system other than Windows, unless you are willing to run emulation layers or virtual machines, in which case anything I have written here is old news to you!
Tax is often a complex area so I accept that the odd misquote or misunderstanding of comments I have made will creep into media reports. I don't intend addressing them here but I will discuss one that has crept into the academic literature so researchers are not puzzled by it.
"Rough calculations reveal that, in the period 1998/9 to 2000/01, the collection of personal income tax has shown an efficiency gain of about 7 per cent a year.81 SARS's collection of VAT during this time period, however, actually declined by 50 per cent because of changes in exemptions.82...
81 For the calculation method see Smith (2003).
82 Interview with Franz Tomasek, Assistant General Manager of Tax Legislation, SARS."
- Tax and Society in South Africa by Steven Friedman and Laila Smith, Centre for Policy Studies, Johannesburg.
A review of VAT collection for 1998/9 and 2000/1 according to the annual Budget Review published by National Treasury shows growth from R44.0 billion to R54.5 billion. So, what happened?
What happened was a change in the VAT registration system. In common with many VAT systems around the world, enterprises do not have to register until the VATable supplies they make exceed a threshold. In South Africa's case the threshold was increased from R150 000 to R300 000 p.a. in 1999. The system, however, provided (and still provides) for voluntary registration below this threshold. Unfortunately some people registered for VAT so that they could claim VAT refunds on private or hobby expenses.
As one of the measures to counter this abuse of the VAT system a threshold of R20 000, below which VAT registration is not permitted, was introduced in 1999. Taken together with the increase in the threshold for compulsory registration, this led to a reduction in the number of enterprises registered for VAT of approximately 50%.
On 18 May 2002, Personal Finance overlooked my preference and put a name to (one of) the SARS staff answering readers' questions. Here are three questions and the answers that appeared under my name.
Q. As an avid reader of Personal Finance, I wonder if you could answer my query which our broker & person from our bank were unable to answer? Re:The donation to children which has just been raised to R30 000. Is this donation a once off donation or per annum? Is the R30 000 for each child or for all your children? What happens if all your children live overseas & you wish to convert to foreign currency? Does this donation which presumably you put in your will only come into effect once you die or can one donate the money now?
A. The first point to be made is that the R30 000 donations tax exemption applies to all donations other than those donations covered by the specific exemptions in section 56(1) or section 56(2) of the Income Tax Act, 58 of 1962. These specific exemptions include -
This general exemption is an annual exemption and not an exemption per donation. It should be seen as a de minimis exemption for day to day donations that may be made under a variety of circumstances. These donations may include anniversary gifts, birthday gifts, religious festival gifts, donations to beggars, and wedding gifts. An individual who donates the full exempt amount to one beneficiary or otherwise exhausts the general exemption must therefore account for donations tax on any further donations.
Where a donation is made in a foreign currency, the value of the donation must be determined at the time of the donation and converted to Rand using the exchange rate on that date.
Q. My husband receives a UK pension. He has received his income tax returns because he pays tax on a local annuity that he receives. Last year you published an article by Charlene Clayton that said that UK Pension are safe for the time being as a moratorium was in place of 3 years. In this years tax return section 6.1 requires foreign pensions to be declared in South African currency. Is the moratorium now revoked and UK pension for the tax year 2000/01 is to be taxed for the whole year?
A. No. The exemption in terms of section 10(1)(gC) of the Income Tax Act, 58 of 1962, continues to apply to foreign social security pensions as well as to other (private sector) pensions from a foreign source in respect of employment in another country.
Q. I have 2 questions regarding taxation on overseas accounts. Is the interest gained on a foreign account taxable only if it is brought into South Africa? In the 2002 tax forms, this foreign interest amount must be expressed in Rands only. What exchange rate does SARS expect us to use?
A. The interest is taxable whether or not it is repatriated to South Africa. If this were not the case offshore investments would enjoy an unfair advantage over domestic investments. The exchange rates on the dates that the interest accrued to the reader must be used. If any credit is claimed for foreign tax paid, the tax must be converted to Rand at the exchange rate on the date that it was paid or, if it was not paid by the end of the relevant year of assessment, at the exchange rate at the end of that year. [Note: The exchange rate to be used was subsequently changed to the average exchange rate for the year of assessment. Now either exchange rate may be used by an individual for ordinary income and expediture, whilst the average rate must be used for claiming any credit for foreign tax paid.]