Budget Speech 2015

We are also proposing a number of tax measures to promote energy efficiency, which will be discussed further with industry, the electricity regulator, Eskom and other interested parties.

The first proposal is a temporary increase in the electricity levy, from 3.5c/kWh to 5.5c/kWh, to assist in demand management. This additional 2c/kWh will be withdrawn when the electricity shortage is over. Secondly, an increase is proposed in the energy-efficiency savings incentive from 45 c/kWh to 95 c/kWh, together with its extension to cogeneration projects. Other measures under consideration include enhancing the accelerated depreciation for solar energy.

In the absence of a carbon tax, the electricity levy serves both to promote energy efficiency and encourage lower greenhouse gas emissions. The introduction of a carbon tax in 2016 will provide an additional tool to deal more sustainably with the current electricity shortage, while lowering the electricity levy. A draft carbon tax bill will be introduced later this year for a further round of public consultation.

To ensure that the burden is fairly distributed, steps will be taken to ensure that the electricity levy applies to all users, especially energy-intensive users, while ensuring that there are no double-payments.

Honourable Members, we are also taking further steps to combat financial leakages which deprive our economy of billions of rands through erosion of the tax base, profit shifting and illicit money flows.

This is the advice I received from Durban businessman, Mr Wolfe Braude, who is with us today: “Action has to be taken to close tax evasion loopholes such as transfer pricing, and profit shifting strategies by SA corporates. I ask that South Africa continue its support for the recent G20 decisions in this regard and the implementation of actions in support of transparency and sharing of information. South Africa must similarly stand firm in the SADC against tax havens.”

The South African Reserve Bank, the Financial Intelligence Centre and the Revenue Service work closely to monitor capital flows. This assists in identifying movements of funds for tax reasons. Internationally, there is increasing collaboration between bank regulators and tax authorities, and so progress is being made to reduce both capital leakage and tax evasion. Drawing on advice of the Davis Tax Committee, amendments will be proposed to improve transfer-pricing documentation and revise the rules for controlled foreign companies and the digital economy.

There are two further revenue proposals that I need to explain. They both arise from challenges in respect of earmarked taxes.

The first is a 50 cents a litre increase in the Road Accident Fund levy.

The increase is required in order to finance the progress made by the RAF administration in clearing the claims backlog. But it also reflects the current compensation system, which has accumulated a R98 billion unfunded liability, is not sustainable. Legislation to establish the new Road Accident Benefit Scheme will be tabled this year, to provide for affordable and equitable support for those injured in road accidents. Once the legislation has been passed, the levy will be assigned to the new scheme.

The second special revenue proposal is a one-year relief measure in respect of Unemployment Insurance Fund contributions. Unlike the Road Accident Fund, the UIF has an accumulated surplus of over R90 billion. Improved benefits are now being introduced, but it is nonetheless possible to provide temporary relief to both employers and employees. The proposal is that the contribution threshold should be reduced to R1 000 a month for the 2015/16 year. This means that employers and employees will each pay R10 a month during the year ahead, putting R15 billion back into the pockets of workers and businesses.