1. PORTFOLIO COMMITTEE ON FINANCE BUDGET HEARINGS: 2007/8

2. BUDGET 2007 APPLYING LAW DIFFERENTLY  PERSONAL TAX Usual relief for individuals, BUT still a top marginal rate of 40% How do we compare globally? OECD?

3. BUDGET 2007 APPLYING LAW DIFFERENTLY  PERSONAL TAX Savings and retirement reform – WELCOMED Abolition of retirement fund tax – WELCOMED

4. BUDGET 2007 APPLYING LAW DIFFERENTLY  PERSONAL TAX (cont.) Tax-free savings Thresholds increased: –Estate duty –Donations – CGT ALL WELCOMED

5. BUDGET 2007 APPLYING LAW DIFFERENTLY  STC REFORMS Phase 1 (of 2) –Reduction of STC rate: 12,5% to 10% –With effect from 1 October 2007 Long lead time + Sketchy details = …CONSIDERABLE UNCERTAINTY

6. STC – As we know it: GROUPS APPLYING LAW DIFFERENTLY HOLDCO OPCO dividend NO STC: Group exemption STC payable - effective rate: 36.89% (now 35.45 %) Level of tax

7. STC – As we know it: GENERAL APPLYING LAW DIFFERENTLY INVESTCO OPCO NO STC: Credit STC payable Level of tax dividend

8. Impact of Dividend Withholding Tax APPLYING LAW DIFFERENTLY INVESTCO OPCO Level of tax dividend Level of tax? withholds

9. APPLYING LAW DIFFERENTLY  ISSUES: Withholding tax – on ALL shareholders International practice: DWT (typically) only on NON RESIDENT shareholder Dividend withholding tax

10. APPLYING LAW DIFFERENTLY  ISSUES Exemption of dividend income? Retirement Fund Tax abolished: –Will Retirement Funds be taxed under DWT? Dividend Withholding Tax

11. APPLYING LAW DIFFERENTLY  ISSUES Exemption of dividend income? Public Benefit Organisations –Position must be addressed –If DWT applies… –NOT tax exempt Dividend withholding tax

12. APPLYING LAW DIFFERENTLY  ISSUES Question: who are the ultimate shareholders? It is US, individuals: –Funds: RFT abolished, but DWT? –Unit Trusts: will it be able to pass DWT on to investor? –(Currently: investor gets STC credit) Dividend withholding tax

13. APPLYING LAW DIFFERENTLY  CORPORATE ISSUES How are INTRA-GROUP dividends to be treated? Under STC system: no tax until dividend exits group Dividend withholding tax

14. How will DWT impact GROUPS? APPLYING LAW DIFFERENTLY HOLDCO OPCO dividend NO STC: Group exemption STC payable - effective rate: 36.89% (now 35.45 %) Level of tax

15. APPLYING LAW DIFFERENTLY  ISSUES No mention of IMPUTATION SYSTEM –Should provide CREDIT: –for TAXES on profits –out of which dividends are paid Dividend Withholding Tax

16. Imputation system APPLYING LAW DIFFERENTLY INVESTCO OPCO NO STC: Credit STC payable Level of tax dividend

17. APPLYING LAW DIFFERENTLY  ISSUES Transitional issue: Section 44(9) ITA abolished: –Throws amalgamation transactions in turmoil –More focused interim provision required –New changes to be introduced: only October 2007 Dividend withholding tax

18. APPLYING LAW DIFFERENTLY  ISSUES Transitional issue: –How will accumulated STC credits be treated? –Impact on financing transactions (preference shares) Dividend withholding tax