REVENUE LAWS AMENDMENT BILL, 2002 National Treasury (Opening remarks)

Purpose of bill The proposed Bill deals with technical corrections. The proposed Bill does not reverse prior policy. The proposed Bill covers 5 major items of legislation since 2000. Corporate reorganisations (Oct 2001) Strategic Investment Incentive Projects (July 2001) CGT (March 2001) residence base taxation (Nov 2000) foreign dividends & PBOs (July 2000) The Proposed Bill is a normal consequence of major tax reform.

Affording Taxpayer Relief The proposed Bill is designed to help taxpayers. most changes work in taxpayers favour;and in fact, most of the pressure for this Bill has been as a result of pressure from taxpayers, especially in the area of company reorganisation. The proposed changes stem from: questions from interested parties; numerous phone calls; meetings; and letters received in the course of the year from concerned taxpayers.

These letters include: Deloitte&Touche taxation services. South African Fiscal Association. Nedcor PWC. Ernst & Young Standard Bank Werksmans. Association of Unit Trusts Prof M Katz. Mr M van Blerck Remgro limited Mr Ernest Mazansky

The Bill addresses technical corrections-not policy changes Several areas required technical corrections: to clarify wording. to address ambiguities and inconsistencies. Miscellaneous amendments separately identified in the Budget: involving changes to Tax administration; and isolated changes to Tax Policy. Such as the Transfer Duty.

Corporate reorganisations Relaxed and clarified, thereby providing certainty and lowering transaction costs for taxpayers. Allows banks, insurance companies and similar financial institutions to reorganise in a tax free manner: These entities initially fell out of the system due to the banking review as a result of the low effective rate for that sector. The banking review revealed that preference shares, leasing and derivatives are a subject of avoidance, all of which are unrelated to corporate re-organisations

Currency transactions National Treasury and SARS began to realise that the current rules are inconsistent and confusing. Long awaited proposed regulations for individuals were incorporated into law (prospective). The rules also eliminate all currency gains stemming from routine travel and personal expenses. New rules: Allow for a taxpayer choice between: 365 day averaging; or weighted average. Awaiting comments from taxpayers on whether this averaging should be daily, weekly or monthly.

Issue of Retroactivity Currency amendments. Date of promulgation (Dec. 2002): Corporate reorganisations. Date of Tabling in Parliament (Nov. 2002). Why not retro-active? Many taxpayers have relied on current legislation and SARS will have difficulty re-opening assessments; This issue is still subject of consideration