Not many changes expected in this year's budget

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With the 2008/9 budget in mind, David Honeyball, director at BDO Spencer Steward (Cape) Inc in Port Elizabeth, is not anticipating many changes in taxation. He is expecting some relief for individual taxpayers, but nothing like taxpayers have experienced in the past. He also envisages some focus on the taxation of trusts as mooted in last year's budget.

With regard to companies he also expects corporate tax rates to remain at 29%. "Companies would no doubt like a reduction in corporate tax rates. The magical 28% tax rate has been on their wish list for a few years now but I suspect that Trevor Manuel will not be able to achieve a reduction in tax rates in the current budget as expected revenue collections are lower than prior years, when government enjoyed massive budget surpluses," he says.

Honeyball mentioned that he would like to see some form of additional relief in terms of group restructure provisions and some legislative clarification of the Brummeria decision in respect of interest free loans. Interest free loans are a significant element of the structuring of many family operated businesses.

Winners in this year's budget are hard to predict given that Manuel does not have as much to hand back as before. Honeyball feels that individual tax payers will have some tax savings. The losers in the budget are likely to be the smokers and drinkers as he expects the sin taxes will increase, as they usually do.

"Last year Manuel made some comments in respect of the taxation of trusts," says Honeyball.

"I hope there will not be any significant amendments to the taxation of trusts this year. It seems as though SARS has had a vendetta against trusts for a while, mainly because it views them as a planning vehicle."

According to Honeyball the macro issues affecting the current financial policy would be the balance of payments on the current account, high inflation rates and high levels of consumer spending.

Honeyball is not aware of any unusual trends that his clients are experiencing, but most clients are concerned at the high level of interest rates, sudden slow-down in economic growth as a result of higher inflation, the electricity crisis and political instability within the ruling party. From a tax perspective, clients are frustrated at the result or outcome of tax cases such as the Brummeria case and SARS's lack of action as a result of this type of judgement.