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Gordhan Reviews South African Tax Season

Tuesday, April 3, 2012

South Africa’s Minister of Finance, Pravin Gordhan, has disclosed the preliminary tax collection results of the South African Revenue Service (SARS) for the 2011/12 fiscal year, and introduced its new five-year Compliance Programme.

Total tax revenue of ZAR742.7bn (USD96.9bn) during the year (an annual increase of 10.2%) kept the country’s tax-to-gross domestic product (GDP) ratio relatively unchanged year-on-year, from 24.5% in 2010/11 to 24.8% in 2011/12, but well below the pre-crisis high of 27.6% in 2007/08.

The main revenue contributors for 2011/12 were personal income tax (PIT) collecting ZAR251.6bn, a rise of 10.3% year-on-year that was supported by high provisional payments and higher than expected wage settlements; and corporate income tax (CIT) producing ZAR153.7bn, an annual increase of 14.2%.

Value added tax (VAT) collections, at ZAR190.5bn, were up by 3.8%, while revenue from customs duties increased by 28.9%, due to importation of vehicles, clothing and footwear.

“Although the global crisis is no closer to resolution,” Gordhan commented, “buoyant growth in tax revenue in South Africa was driven by the strong performances of import taxes, recovery of corporate profits and resilient consumption.”

Revenue growth benefited from strong contributions from the financial sector (plus 37%), and CIT collections also benefited from stronger imports in the automotive sector and increased investments in capital intensive industries, such as energy, manufacturing and agriculture. “This,” he added, “is an important indicator of investor confidence in the future of the domestic economy and provides a good platform for future growth”.

The preliminary outcome of revenue collection for 2011/12 represents, Gordhan confirmed, “another excellent contribution by SARS to ensure our fiscal expenditure programmes are sustainable. The strong revenue performance was also borne from a culture of growing tax compliance.”

Over the last 18 years SARS has steadily raised rates of tax compliance while broadening the tax base. The number of registered individual taxpayers increased from 1.7m in 1994 to more than 6m in 2009/10, but then doubled following policy changes in 2011 to register all individuals in the country who are formally employed (13.7m individuals by end-March 2012) despite changes to the thresholds.

Over the same period, the number of companies registered for income tax increased from 422,000 in 1994 to more than 2m in 2011/12. Registered VAT vendors grew from 397,000 in 1994 to 652,000, in spite of changes to the thresholds, and the number of registered employers rose from 177,000 in 1994 to 385,000 currently.

Gordhan also disclosed that SARS will, from this year, increase its efforts to create a climate that is increasingly conducive to full compliance by all taxpayers. A new SARS Compliance Programme has been introduced, which is an overview of SARS’s plans for the next five years to further boost the levels of compliance with tax and customs legislation.

Research by SARS has identified particular areas in the South African economy and in the tax system that poses significantly higher risks of non-compliance. Over the medium-term, SARS will concentrate its attention on the construction industry, where research by the tax office has shown that this industry has significantly lower levels of compliance than other sectors in the economy. Additionally, SARS will crack down on the abuse of trusts by wealthy South African individuals, a significant number of whom are seen to not be registered taxpayers.

Transfer pricing by large businesses will also come under the spotlight with a comprehensive international review of the practice, the training of SARS staff and greater cooperation with other countries’ revenue administrations.

In addition, tax practitioners, who currently represent around 3m taxpayers, will be pursued to ensure that they are all persons of good standing and members of a professional body, and SARS will develop a rigorous risk profiling system to identify high risk practitioners.

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The Report

Offshore Trusts Guide: Introduction

The History of Offshore Trusts
Development of Professional Competence in the Jurisdictions
What Future for the Trust?
The New Age of Transparency
The Swiss Association of Trust Companies
The Society of Trusts and Estates Practitioners

Offshore Trusts Guide: Jurisdictions


Bahamas: Legal Framework and Formation Rules and Fees
Bahamas: 2006 Private Trust Companies Legislation


Barbados: Legal Framework and Formation Rules and Fees
Barbados: Supervisory and Licensing Regime and Fees


Bermuda: Legal Framework and Formation Rules and Fees
Bermuda: Supervisory and Licensing Regime and Fees

British Virgin Islands

British Virgin Islands: Legal Framework and Formation Rules and Fees
British Virgin Islands: Special Trusts Act 2003
British Virgin Islands: The Trustee Act 2003
British Virgin Islands: :Supervisory and Licensing Regime and Fees
British Virgin Islands: New Laws on Private Trust Companies
British Virgin Islands: New Private Trust Company Regulations

Cayman Islands

Cayman Islands: Legal Framework and Formation Rules and Fees
Cayman Islands: Supervisory and Licensing Regime and Fees

Cook Islands

Cook Islands: Legal Framework and Formation Rules and Fees
Cook Islands: Supervisory and Licensing Regime and Fees


Cyprus: Legal Framework and Formation Rules and Fees
Cyprus: Supervision, Licensing and Tax


Gibraltar: Legal Framework and Formation Rules and Fees
Gibraltar: Legislation, Regulation and Supervision


Guernsey: Legal Framework and Formation Rules and Fees
Guernsey: Trusts Law 2007

Isle of Man

Isle of Man: Legal Framework and Formation Rules and Fees
Isle of Man: Supervisory and Licensing Regime
Isle of Man: Uses Clients and Tax Treatment


Jersey: Legal Framework and Formation Rules and Fees
Jersey: Supervisory and Licensing Regime
Jersey: Trusts Amendment Act 2006
Jersey: Foundations


Liechtenstein: Legal Framework and Formation Rules and Fees
Liechtenstein: Regulation Supervision and Transparency
Liechtenstein: Characteristics of Liechtenstein Trusts
Liechtenstein: Foundations


Madeira: Legal Framework and Formation Rules and Fees


Malta: Legal Framework and Formation Rules and Fees
Malta: The Trust and Trustees Act 2004


Mauritius: Legal Framework and Formation Rules and Fees
Mauritius: Characteristics of the 2001 Trusts Act
Mauritius: Additional Provisions of the 2001 Trusts Act
Mauritius: Tax Treatment


Monaco: Legal Framework and Formation Rules and Fees


Nevis: Legal Framework and Formation Rules and Fees


Panama: Legal Framework and Formation Rules and Fees
Panama: Requirements for Acting as Trust Company in Panama


Seychelles: Legal Framework and Formation Rules and Fees

Turks & Caicos

Turks & Caicos: Legal Framework and Formation Rules and Fees
Turks & Caicos: The Voidable Dispositions Ordinance


Vanuatu Legal Framework and Formation Rules and Fees

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