Tax3761

• Main types of taxation in South Africa

  • Income tax
  • Capital gains tax
  • Value-added tax (VAT)
  • Excise and customs duties
  • Other taxes (e.g. transfer duty, local authority taxes, donations tax, estate duty, securities transfer tax)
• Classification of taxes


  • Based on what the tax is levied on (tax base)
  • Based on the method used to calculate the tax
  • Based on the person responsible for paying the tax
• Taxes based on tax base

  • Income tax on income earned
  • Consumption taxes on sale or use of goods/services (e.g. VAT, excise duty, customs duty)
  • Wealth taxes on ownership of assets (e.g. property rates, transfer duty, donations tax, estate duty)
• Taxes based on calculation method

  • Direct taxes (e.g. income tax, capital gains tax)
  • Indirect taxes (e.g. VAT, excise duty, customs duty)
• Taxes based on person responsible


  • Taxes paid directly by the taxpayer (e.g. income tax, capital gains tax)
  • Taxes collected by a business on behalf of the government (e.g. VAT, PAYE)
• Key role-players in South African tax landscape

  • Minister of Finance
  • National Treasury
  • South African Revenue Service (SARS)
  • The Commissioner of SARS
  • The Tax Ombud
  • Legislation
  • Taxpayers
  • Professional accountancy bodies
  • International organisations
• The Minister of Finance is mandated with overseeing financial functions within the South African government, including responsibility for National Treasury, SARS, FIC etc.
• National Treasury is the governmental department responsible for the fiscal policy that can be used to achieve the macro-economic goals of South Africa
• SARS is the tax collection agency of South Africa, responsible for collecting tax revenue, ensuring compliance, and facilitating legitimate trade
• The Commissioner of SARS is the person responsible for the management of SARS and who reports directly to the Minister of Finance
• The Tax Ombud is an independent and impartial office that deals with taxpayers' complaints against SARS
• Legislation other than tax laws that impact the tax landscape in South Africa include the Constitution, PAJA, and POPIA
• Taxes paid by South Africans

  • Income tax
  • Donations tax
  • Estate duty
  • Securities transfer tax
  • Local property rates
• There are several ways to classify taxes
• Factors used to classify taxes

  • Tax base (what the tax is levied on)
  • Tax rate structure (method used to calculate the tax)
  • Tax incidence (who is responsible for paying the tax)
• Income tax


  Tax levied on income earned
• Consumption taxes


  Taxes on the sale or use of goods or services (e.g. VAT, excise duty, customs duty)
• Wealth taxes

  Taxes on the ownership of assets or capital gains (e.g. capital gains tax, estate duty, donations tax, local authority taxes)
• Other taxes


  Taxes levied on specific business transactions (e.g. stamp duty, transfer duty, securities transfer tax)
• Proportional tax


  Tax levied at a fixed rate on the amount of income earned
• Progressive tax


  Tax rate determined by the person's income, higher income = higher tax rate
• Regressive tax


  Tax rate decreases with increase in person's income
• Direct tax

  Impact and incidence of tax falls on the same person
• Indirect tax

  Seller bears the impact, consumer ultimately pays the tax
• The classification of taxes is an important consideration in the design of tax policies in South Africa
• When designing tax policies, the tax base, tax structure and tax incidence need to be considered
• The criteria of a good tax system include equity, certainty, convenience and economy
• Modern tax principles must also include social justice, eliminating inequality, respecting diversity, and providing supportive environments
• The budget process


  1. Preparation of medium-term expenditure framework

  2. Minister of Finance presents budget speech to Parliament

  3. Budget documents tabled in Parliament
• The medium-term expenditure framework sets out expected expenditure and revenue for the next three years
• Macro-economic policies included in the expenditure framework

  • Maintenance of full-time employment
  • Achievement of high economic growth rate
  • Maintenance of price stability (prevention of inflation)
  • Maintenance of external equilibrium (favourable balance of payments and stable exchange rate)
• Fiscal policy


  Influences total demand in the economy through government expenditure and taxes
• Monetary policy


  Action by the monetary authority (SARB) to influence money and credit through interest rates
• Taxation measures are part of fiscal policy, not monetary policy
• Budget documents tabled in Parliament

  • Estimate of expenditure from National Revenue Fund
  • Estimate of income to be received
  • Statistical/economic survey
  • Tax proposals
  • Comparative figures of income
  • Other relevant documents
• The budget speech starts with a review of economic, political and social circumstances affecting the budget
• The budget speech discusses estimated state expenditure, reasons for expenditure, and policy objectives
• The budget speech also discusses sources of revenue, including details of proposed tax changes
• The Income Tax Act 58 of 1962 is amended through taxation bills presented to Parliament and signed into law
• It is critical to use the correct version of the Income Tax Act when calculating tax liability or advising clients