Tag Archive | budget speech

Budget 2016: more on amnesty

 sent to clients 8 April….

Deadline extended for amnesty…..

In the 2016 Budget presentation, which included an amnesty offer on undeclared overseas funds, it was claimedpravingordhan by the main opposition party that that this year’s financial plan may not have been bold enough to avert a downgrade, top of the mind remaining possible future tax hikes, particularly VAT – on which the jury is still out – and the ballooning public service wage bill.

Among the many other points raised in this year’s budget was the remark by Minister of Finance, Pravin Gordhan, that “The principles of honesty and fairness needed to be embraced by all South Africans in order to overcome the challenges.”

The amnesty plan

To follow this up with action, Treasury have made a second offer for all those with undeclared assets abroad to get on the right side of the law without penalties and now have extended even that deadline because more time is often needed for applicants to prepare submissions.

“In acting together”, the Minister said, “we can address declining confidence, the retreat of capital and we can combat emerging patterns of predatory behaviour and corruption.” On this issue, he offered amnesty on undeclared offshore income and assets and another chance of the regularisation of offshore affairs.

Very little reaction occurred in parliamentary benches, possibly because the implications meant little personally but in having had to sweep the floor for further tax revenue inputs, any idea that works is a good one and a “voluntary disclosure programme” (to give it it’s technical name) could raise between R2bn to R4bn, once applied. Clearly also the Minister is looking for more reaction to increase funds resulting in the deadline being moved along the calendar.

Budget papers

budget 2016This offer was included with the usual raft of Bills the Minister tabled before he commenced his Budget speech and a few days later debated by the Standing Committee on Finance. They are “money” Bills and cannot be altered by Parliament, only commented upon.

Gordhan warned in his speech that “in terms of the new global disciplines on exchange of information between countries time was running out for tax dodgers who still have undeclared assets outside South Africa.”

Details

There are a number of conditions of course.

SARS will only include 50% of the total amount used to fund the declared acquisition assets before March 2015 in the taxable income column, as it were, and this will subject to normal tax. All refers to items from March 2010 onwards as taxable income at normal rates. Investment returns prior to March 1 will be exempt. Interest arising from tax debts as a result of the voluntary disclosure will only commence from March 2010.

Bearing in mind that relief is also granted from the appropriate penalties that would have applied and any criminal action not taken, this say experts, is a pretty fair offer. Levies will be applied of between 5% and 10% according to whether the funds from proceeds are repatriated or not, which levy must be paid from outside external funds. On levies generally, there are a number of special conditions according to circumstances.

Not just business

Minister Gordhan made it quite clear that the offer was coming from both the Treasury and the Reserve Bank. He said that deceased estates and beneficiaries of discretionary trusts can participate in the programme if they deem and if they admit that the funds were destined for them. Resident South Africans are included in the amnesty.

The grace period was given originally in the Budget for the period October 1 to March 31 of the current government financial year but in hearings before Parliament later, the Standing Committee on Finance listened to business submissions on the Budget and “recommended” to Treasury that this is impractical given the amount of time it takes to come up with all the necessary information and submit, bearing in mind, as we say, Parliament cannot touch a money Bill. Treasury obviously heard this

Public submissions worked

It was chairperson of the Finance Standing Committee, Yunus Carrim, who pointed this out to Treasury after listening to public submissions, so at least he will find that more applicants will probably be encouraged to submit.
Previous articles on category subject
Budget vote speeches: Out of touch with each other – ParlyReportSA
Minister Nene maps survival route – ParlyReportSA
Parliament votes on 2014 budget – ParlyReportSA

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Lock in at Parliament with budget speech

Gordhan Pravin with limited choices…

pravin gordhanRarely does a medium-term budget statement  in Parliament attract the kind of attention as has the current speech by South African finance minister, Gordhan Pravin.

He has been in a most difficult position. He is in fact juggling with the country’s “twin peaks” budget deficit numbers in order to come up with something that does not surrender the nation to movement down to a much lower position amongst the coterie of developing and emerging economies.

To amplify on the importance of what he says and how the newspapers and news agencies – and therefore world trading markets – depend on timeous information on this speech and perhaps it is worth pausing to note how the system in Parliament works.

Lock in part of parliamentary process

At a defined time a few hours in the morning preceding the speech that afternoon, all accredited financial journalists and those associated with news dissemination, gather in an allocated parliamentary meeting room and security is, to use the American phrase, “locked down”.  The doors are actually locked.

Even cell phones, i-phones, satellite phones and any form of communication device that has been invented since Graham Bell first telephoned anybody, has to be surrendered to parliamentary officials.      At that point round about 11.00am or mid-day, everybody gets to see the speech to be made by the finance minister Gordhan Pravin, scheduled for 15.00hrs, the same day.

This gives all those in the “lock in” the few hours needed to disseminate, consider and write what they wish to communicate on the budget itself, at that point the media being the only members of the public, especially the financial markets (and the rating agencies), to have any knowledge of what is to be said. There are no wi-fi facilities for laptops.

As the minister speaks……

At precisely the same time as the minister utters his first words in the House reading the Medium Term Budget speech, the doors are unlocked, cell phones returned, all journalists and media may release their material to the markets and well before the minister has finished his speech, Reuters, et al, have released their statements to the markets.

All of this, however utterly childish it may seem at the time, gives an indication of how important budget speeches are and the value of the message that is sent by the accumulated force of financial journalism – this particular budget speech being a sensitive one.

Of course, all would hope that in a perfect world minister Gordhan puts a freeze on public service pay packets for two years; announces further massive infrastructure spends with international funds for education, road and harbours; offers soft incentives to encourage exports with a weak rand and speed up the National Development Plan with ideas to counter the US resurgence. But all of this is unlikely.

Certainly on the left

ParlyReport is not a newspaper, so we confine our observations to monitoring government plans, department by department, in next issues but it is worth noting that finance minister Gordhan, himself a committed socialist and dealing with a cabinet that includes many a communist and certainly a number of trade unionists, will walk the tightrope with an election coming and votes needing to be collected, especially in the Northern Cape and Gauteng.

Our guess is that minister Gordhan will be forced to “talk the talk”, not “walk the talk”, talking his way through this one with South Africa in the grip of sluggish economic growth and an election coming. We should not expect too much from this speech other than bravery and it is hoped that minister Gordhan will resist pressure from the unions.

Our report therefore now relies upon the mundane and the “inside track” as usual and we await, like all, the results…….  although attending the “lock in” is an enjoyable process of watching the parliamentary system working and the financial markets re-acting.

Headlines to our clients this week were:

•    Codes of Practice given one year installation period
•    Nuclear stakeholders meeting avoids objections
•    Intellectual Property Bill aimed at medical patents
•    Shale gas regulations out for comment
•    Home Affairs in the mire
•    PetroSA keeps them all guessing
•    Minister of Finance tables Bill at halfway year budget
•    Central Energy Fund emerges from the shadows
•    Marcus steadies the ship
•    Land rights takes another step with new Bill
•    Department of energy reports for the year

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