Tuesday, 03 March 2015 - 20:00
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Seed Weekly - Income Tax
Last week, the South Africa Minister of Finance tabled the government budget in parliament. This process actually provides a very detailed look into government finances. Naturally of most interest are some of the specific changes to the tax act that will affect both individual and corporate taxpayers. In Western democracies we have become so accustomed to high rates of tax on both the corporate and individual level, that we think that this has always been the norm in society.
Yes, the concept of a tax has been around for much of civilisation and, in the case of the Roman Empire, consisted of a modest percentage levied against wealth in the form of land, homes, slaves etc. Rome also collected customs duties on imports and exports as well as a form of sales tax.
But in many ways the concept of an income tax as we understand it is a relatively modern concept – modern in that it has been around since approximately 1800 in Great Britain, introduced to pay for weapons and equipment for the French Revolutionary War. A tax on income does presuppose that there is a common understanding and recording of receipts and expenses, accurate recording of profits and reliable records etc.
In the US the first income tax was suggested during the war of 1812 but was never inaugurated. Then the Tax Act of 1862 was passed with rates of 3% on income above $600 and 5% on income above $10 000. It was primarily to finance the Civil War and while the population accepted the tax imposed, compliance was not very high at all.
In the US, this Act was repealed in 1872 and in 1913 an amendment was passed, which allowed Congress authority to tax US citizens on income from whatever source derived. Over the years the tax act has become progressively more complicated.
In South Africa, income tax was first introduced in 1914. The tax Act was updated again in 1962 and from that stage has gone through numerous updates and amendments. It is known as a progressive income tax system in that the higher the earnings, the higher the rate of tax. In the latest budget announcement the top tax rate was increased from 40% to 41%.
In the latest budget for the year ahead, government is looking to bring in tax revenue of just shy of R1,2 trillion, up from R1,1 trillion. The three biggest components of this revenue are individual tax at 36%, VAT at 26% and corporate tax at 19%. The main sources of tax revenue are reflected in the table below.
Expenditure is budgeted to come in at R1,35 trillion, leaving a budget deficit of R162 billion which will need to be financed through the raising of fresh government debt.
The country’s gross domestic product (GDP) is expected to be in the region of R4,2 trillion and so revenue as a percentage of GDP comes in at 28,4%, while expenditure comes in at a massive 32,2%. The budgeted deficit as a percentage of GDP is a number that is followed closely. This is now budgeted to come in at 3,9%.
As the government’s debt burden increases, so does the interest component in servicing this debt, which in itself is a large component of expenditure. The interest bill was R121 billion in last financial year and in three years’ time is expected to grow to R158 billion and average 3,2% of GDP.
However, because of the threat of an investment downgrade, despite increasing in absolute terms, debt as a percentage of GDP has been revised downwards from the projection in the medium term budget policy statement in October 2014. Total gross loan debt as a percentage of GDP is expected to rise to 46% now to 47,6% in three years’ time.
There is little argument that the South African government has little wriggle room when it comes to increasing government expenditure, raising meaningful levels of new taxes and increasing its debt levels, without having an adverse consequence. Just like any business or household that has a tight budget and high levels of debt – i.e. higher than annual revenue – it has no choice but to continue to look for ways to increase its revenue. But probably of greater importance is to look for ways to ensure greater efficiency in expenditure. This is going to be the real challenge in the years ahead.
Regards
Ian de Lange
Source : taxworld.org
www.seedinvestments.co.za
info@seedinvestments.co.za
021 914 4966
Tue, 03 Mar 2015
Top News
The rand firmed late on Tuesday after tumbling to two-and-a-half week lows earlier when rating's agency Fitch warned that South Africa could lose its investment grade status. Full story
Local markets
The JSE closed 0.34% higher today, overcoming an 2.75% loss in gold mining shares and a 0.28% fall in financials. Full story |
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Israeli Prime Minister Benjamin Netanyahu warned U.S. President Barack Obama on Tuesday against accepting a nuclear deal with Iran that would be a "countdown to a potential nuclear nightmare" by a country that "will always be an enemy of America". Full storyIran on Tuesday rejected as "unacceptable" U.S. President Barack Obama's demand that it freeze sensitive nuclear activities for at least 10 years, but said it would continue talks aimed at securing a deal, Iran's semi-official Fars news agency reported. Full storyRival Libyan forces carried out tit-for-tat air strikes on oil terminals and an airport on Tuesday, escalating their battle for control of the oil-producing country days before United Nations peace talks are to resume in Morocco. Full story |
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Markets | Gold steadied on Tuesday as the
dollar eased against a basket of currencies, helping the metal
to recover from early losses that briefly. . . Full story | | U.S. stock prices fell on
Tuesday, with the Dow Jones industrial average and Standard &
Poor's 500 receding from their record highs, while. . . Full story | | Hong Kong shares surrendered
early gains and closed lower on Tuesday, as losses in mainland
China markets outweighed initial optimism fueled by overnight
bullishness. . . Full story | | China's main stock indexes
fell more than 2 percent on Tuesday as excitement over a weekend
interest rate cut was extinguished by worries. . . Full story |
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| Japan's Nikkei share average
edged down in choppy trade on Tuesday as investors took profits
from recent gains, while Sharp Corp tumbled on. . . Full story | | Australian shares ended down 0.4
percent on Tuesday, reversing early gains as investors showed
their disappointment with the central bank's decision to keep
its. . . Full story | | U.S. stock prices rallied on
Monday, with the Nasdaq composite crossing 5,000 for the first
time in 15 years, while the dollar touched. . . Full story | | Australian shares are likely to
track Wall Street higher on Tuesday, although caution will
prevail ahead of a keenly awaited policy decision by. . . Full story |
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SA Business | The administrators of the failed South African lender African Bank Investments said on Tuesday they were in talks to appoint a. . . Full story | | Barclays Africa Group has applied for a Nigerian banking licence and wants to take over the Egypt and Zimbabwe units still. . . Full story | | South Africa's business confidence index edged higher to 92.8 in February from 89.3 in the previous month, although the outlook for. . . Full story | | Nigerian conglomerate Honeywell group plans to invest 150 billion naira ($750 mln) over the next 2-3 years to fund growth across. . . Full story |
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| Japan's NTT
Communications Corp said on Tuesday it has agreed to buy German
data centre firm e-shelter, becoming Europe's third-biggest
operator in the sector. . . Full story | | South African retailer The
Foschini Group aims to almost triple the number of its
stores across the rest of Africa over the next. . . Full story | | Cairo-based African
Export-Import Bank (Afreximbank) has signed an
agreement with the private sector arm of the Islamic Development
Bank to explore sharia-compliant financing and
investment. . . Full story | | South Africa's Royal Bafokeng Platinum said on Tuesday full-year earnings rose 38 percent, due to higher sales, cost cuts and as. . . Full story |
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| Barclays Africa has applied for a licence to operate in Nigeria and is "keen" to take over operations in Egypt and Zimbabwe that still belong to its parent company, its chief executive said on Tuesday.. . . Full story |
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Company News | We wish to advise that the Board of Growthpoint has appointed Mr Estienne de Klerk (formerly ôExecutive Directorö) as Managing Director. . . Full story | | Shareholders are referred to the announcement released on 27 February 2015 and are advised that the annual general meeting will be. . . Full story | | Further to the previous announcement regarding the order sanctioned by the court and the cautionary announcements, the last of which was. . . Full story | | In terms of a general authority granted by Value shareholders at the CompanyÆs annual general meeting held on 14 October 2014,. . . Full story |
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| Bondholders of the Shoprite Investments Convertible Bond are hereby advised that the SHPCB convertible bond will commence trading ex-interest, with respect. . . Full story | | As announced previously, shareholders are hereby advised that there is no change to the companyÆs financial circumstances and it remains in. . . Full story | | Shareholders are hereby advised that Pioneer has agreed to invest in a new company, Food Concepts Pioneer Ltd. (ôFCPLö), together with. . . Full story | | The Annual Financial Statements of CIL for the period ended 31 August 2014 are available from the company secretary, on request,. . . Full story |
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Company Results | Revenue for the interim period increased to R170.5 million (R156.8 million). Gross profit rose to R85.6 million (R82 million), while total. . . Full story | | Revenue for the year shot up to R1.408 billion (2010: R1.186 billion). Income before taxation decreased to R967.3 million (2013: R1.013. . . Full story | | Turnover jumped 16.5% to R104.4 billion (R89.6 billion) and gross income grew 18.3% to R21.0 billion (R17.8 billion). Trading profit came. . . Full story | | Revenue for the interim period increased to R17 billion (R15.3 billion). Operating profit came in at R356 million (R306 million), while. . . Full story |
World Markets (Spot Prices)
Name | Time | RP | Move | % Move | JSE Overall | 17:00 | 53130.34 | 177.43 | 0.34% | JSE Top 40 | 17:00 | 46976.08 | 202.27 | 0.43% | JSE Gold | 17:00 | 1335.85 | -37.84 | -2.75% | JSE Financial | 17:00 | 44012.39 | -125.02 | -0.28% | JSE Industrial | 17:00 | 74817.57 | 474.39 | 0.64% | JSE Indust 25 | 17:00 | 66478.15 | 490.27 | 0.74% | JSE Resource | 17:00 | 44980.43 | 119.40 | 0.27% | DJ Futures | 19:32 | 18150.00 | -102.00 | -0.56% | DJ Ind | 19:58 | 18168.54 | -120.09 | -0.66% | SP 500 | 19:58 | 2102.36 | -15.03 | -0.71% | Nasdaq | 19:58 | 4963.72 | -44.38 | -0.89% | FTSE 100 | 18:35 | 6889.13 | -51.51 | -0.74% | DAX | 19:08 | 11280.36 | -130.00 | -1.14% | CAC40 | 19:08 | 4869.25 | -48.07 | -0.98% | Nikkei | 08:48 | 18815.16 | -11.72 | -0.06% | Shanghai | 09:30 | 3263.05 | -73.23 | -2.19% | Hang-Seng | 06:28 | 24892.25 | 4.81 | 0.02% | All Ords | 07:48 | 5902.90 | -23.40 | -0.39% | NZSE 50 | 06:28 | 5893.66 | .99 | 0.02% |
| | Name | Time | RP | Move | % Move | Gold $ | 19:59 | 1204.69 | -1.13 | -0.09% | Gold R | 19:57 | 14152.25 | -40.01 | -0.28% | Gold R/kg | 19:58 | 454891 | -3820 | -0.83% | Silver $ | 19:59 | 16.2650 | -.1450 | -0.88% | Platinum $ | 19:59 | 1186.40 | .90 | 0.08% | Palladium $ | 19:59 | 829.80 | 2.17 | 0.26% | R186 | 16:55 | 7.70 | .08 | 0.98% | R204 | 16:54 | 6.92 | .07 | 1.02% | R207 | 16:55 | 7.13 | .08 | 1.06% | Brent Crude | 19:58 | 61.24 | -1.34 | -2.14% | Rand / Dollar | 19:59 | 11.7465 | -0.0243 | -0.21% | Rand / Pound | 19:55 | 18.0294 | -0.0155 | -0.09% | Rand / Euro | 19:55 | 13.1526 | -0.0052 | -0.04% | Rand / NZD | 19:57 | 8.8918 | 0.0510 | 0.58% | Rand / AUD | 19:55 | 9.2014 | 0.0652 | 0.71% | Yen / Dollar | 19:59 | 119.5750 | -0.6040 | -0.50% | Euro / Dollar | 19:55 | 0.8923 | -0.0017 | -0.19% | Dollar / Euro | 19:59 | 1.1201 | 0.0022 | 0.20% | Pound / Dollar | 19:55 | 0.6498 | -0.0009 | -0.14% |
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The JSE Today
Trading Statistics
Date | Adv. | Decl. | Unch. | Actives | Volume | Value | Trades | Orders |
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03/03/2015 | 191 | 164 | 67 | 422 | 265,174,369 | R18,275,885,947 | 274453 | 276620 | 02/03/2015 | 147 | 208 | 56 | 411 | 266,872,143 | R14,947,408,970 | 245063 | 881075 | 27/02/2015 | 187 | 178 | 56 | 421 | 277,700,447 | R18,053,885,643 | 214791 | 1456233 | 26/02/2015 | 189 | 154 | 60 | 403 | 248,252,184 | R16,413,222,039 | 207484 | 1167403 | 25/02/2015 | 180 | 188 | 59 | 427 | 243,225,926 | R19,217,392,638 | 229790 | 1377165 |
* Includes all listed instruments on the JSE
Index Summary Index Name | RP | Move | % Move | Top 40 | 46,976.08 | 202.27 | 0.43% | Industrial | 74,817.57 | 474.39 | 0.64% | Mid Cap | 74,467.76 | -53.31 | -0.07% | Small Cap | 60,347.72 | -332.74 | -0.55% | Resource 20 | 44,980.43 | 119.40 | 0.27% | Industrial 25 | 66,478.15 | 490.27 | 0.74% | Financial 15 | 16,748.74 | -89.57 | -0.53% | Financial & Ind. 30 | 70,936.60 | 295.86 | 0.42% | All Share | 53,130.34 | 177.43 | 0.34% | Oil & Gas | 31,436.79 | 101.32 | 0.32% | Mining | 27,702.52 | 29.27 | 0.11% | Gold Mining | 1,335.85 | -37.84 | -2.75% | Platinum Mining | 34.58 | -.48 | -1.37% | GENERAL MINING | 8,075.58 | 56.30 | 0.70% | Oil & Gas Producers | 16,902.98 | 54.48 | 0.32% | Basic Materials | 25,420.05 | 15.75 | 0.06% | Chemicals | 22,428.03 | -113.09 | -0.50% | Forestry & Paper | 40,629.69 | 38.15 | 0.09% | Industrial Metals | 12,910.87 | -259.99 | -1.97% | Industrials | 47,561.38 | 679.90 | 1.45% | General Industrials | 167.06 | 3.84 | 2.35% | Consumer Goods | 66,581.47 | 354.06 | 0.53% | Automobiles & Parts | 7,493.09 | -124.55 | -1.64% | Household Goods | 455.69 | -11 | -2.35% | Health Care | 11,275.94 | 41.68 | 0.37% | Beverages | 227.29 | 2.86 | 1.27% |
| | Index Name | RP | Move | % Move | Food Producers | 9,413.14 | 99.84 | 1.07% | Personal Goods | 1,033.22 | 3.60 | 0.35% | Consumer Services | 15,746.60 | 88.45 | 0.56% | General Retailers | 84,427.79 | 654.91 | 0.78% | Travel & Leisure | 6,623.54 | 78.50 | 1.20% | Media | 372.63 | 2.02 | 0.55% | Support Services | 2,807.83 | 14.81 | 0.53% | Telecommunications | 10,413.52 | 104.42 | 1.01% | Financials | 44,012.39 | -125.02 | -0.28% | Banks | 76,173.40 | -856.69 | -1.11% | Non-life Insurance | 57,881.81 | -564.05 | -0.97% | Life Insurance | 42,101.81 | -45.77 | -0.11% | General Financial | 4,076.84 | 11.34 | 0.28% | Technology | 56,172.63 | 132.52 | 0.24% | SHARIAH TOP40 | 3,682.00 | 14 | 0.39% | FTSE/JSE SHARIAH ALL | 3,952.01 | 6 | 0.15% | COAL MINING | 13,905.93 | -348 | -2.44% | FTSE JSE Fledgling | 6,988.33 | 55 | 0.79% | FTSE/JSE Alt X | 1,482.63 | 13 | 0.91% | SA LISTED PROPERTY | 661.60 | | 0.33% | CAPPED PROPERTY | 570.32 | | 0.34% | RESOURCE | 24,734.63 | 35 | 0.14% | DIVIDEND PLUS | 242.35 | -1 | -0.30% | FTSE/JSE RAFI 40 | 10,027.40 | 18 | 0.18% | Capped Top 40 | 25,071.21 | 105 | 0.42% | Capped All Share | 26,948.68 | 90 | 0.34% | JSE TABACO | 8,705.82 | 63 | 0.73% |
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Click here for the Sharenet Index Summary page
Latest Consensus Changes** Code | Company Name | Status | Updated | MSM | MASSMART HOLDINGS LTD | SELL | 02/03/2015 | LBH | LIBERTY HOLDINGS LTD ORD | HOLD | 02/03/2015 | LON | LONMIN PLC | BUY | 27/02/2015 | IMP | IMPALA PLATINUM HOLDINGS ... | HOLD | 27/02/2015 | RMI | RAND MERCH INS HLDGS LTD | SELL | 27/02/2015 |
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Results Expected** Expected | Company Name | Fin. Date | 04/03/2015 | CAPEVINH | December 2014 (Interim) | 04/03/2015 | EQSTRA | December 2014 (Interim) | 04/03/2015 | EQSTRADA | December 2014 (Interim) | 04/03/2015 | EQSTRADB | December 2014 (Interim) | 04/03/2015 | MMI HLDGS | December 2014 (Interim) |
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Recent Dividends** Share Name | Dec-Date | LDT | Pay-Date | Amount | TIMESMED | 02/03/15 | 30/04/15 | 11/05/15 | ZAR 0.3000 | SA CORP | 02/03/15 | 20/03/15 | 30/03/15 | ZAR 0.1802 | ASCEN B | 02/03/15 | 20/03/15 | 30/03/15 | ZAR 0.1128 | FAIRVEST | 02/03/15 | 20/03/15 | 30/03/15 | ZAR 0.0743 | BIDVEST | 02/03/15 | 10/04/15 | 20/04/15 | ZAR 4.2600 |
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Ex Div** Share Name | Dec-Date | LDT | Pay-Date | Amount | HUDACO | 30/01/15 | 27/02/15 | 09/03/15 | ZAR 3.1000 | ASSORE | 11/02/15 | 27/02/15 | 09/03/15 | ZAR 3.0000 | WOOLIES | 12/02/15 | 27/02/15 | 09/03/15 | ZAR 0.9650 | GFIELDS | 12/02/15 | 27/02/15 | 09/03/15 | ZAR 0.2000 | ARROWA | 10/02/15 | 27/02/15 | 09/03/15 | ZAR 0.1855 |
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Upcoming AGMs** Code | Company Name | Date | Status | BEG | Beige Holdings Ltd. | 06/03/2015 | Confirmed | BEGP | Beige Holdings Ltd. | 06/03/2015 | Confirmed | BEGP2 | Beige Holdings Ltd. | 06/03/2015 | Confirmed |
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