The tax proposals for the 2018 Budget are designed to generate an additional R36 billion in tax revenue for 2018/19.

The main tax proposals for the 2018 Budget are:

In developing these tax proposals, government reviewed the potential contributions from the three major tax instruments which raise over 80 per cent of our revenue; personal and corporate income tax and VAT.

We have increased personal income tax significantly in recent years, particularly at the higher income bands, and our corporate tax is high by international standards.

We have not adjusted VAT since 1993, and it is low compared to some of our peers.

We therefore decided that increasing VAT was unavoidable if we are to maintain the integrity of our public finances.

The current zero-rating of basic food items such as maize meal, brown bread, dried beans and rice will limit the impact on the poorest households.

Vulnerable households will also be compensated through an above average increase in social grants.

Some relief will be provided for lower income individuals through an increase in the bottom three personal income tax brackets and the rebates.

In addition to VAT, we are increasing excise duties on luxury goods and estate duty on wealthy individuals.

Taken together, we believe these proposals best protect the progressive nature of our tax regime, to minimise the impact on lower-income households.

The National Treasury, in close cooperation with the Reserve Bank, the Financial Intelligence Centre and the South African Revenue Service, is taking several steps to detect, disrupt and deter illicit financial flows.

These measures include increasing capacity, coordinating a national risk assessment and improving information sharing between various agencies.

In line with G20 recommendations, policy measures to deal with transfer pricing and base erosion by multinational companies are been implemented and continue to be tightened.

Having a sustainable tax base is important to ensure that government has enough revenue to meet its spending needs.

Companies can structure affairs to reduce their tax base in South Africa and shift their profits to low-tax countries.

This threatens the sustainability of our tax base and is a challenge that most governments are struggling with.

The implementation of country-by-country reporting will enable SARS to ensure that companies pay their fair share of tax in SA.

We are also investigating options to further curb the practice of excessive interest deductions by companies in order to reduce their tax liability.

The realisation of taxes from the off-shore wealth of taxpayers, as highlighted in the Panama and more recently the Paradise Papers, was evidenced in the over 2000 applications for disclosure by South African taxpayers under last year’s Special Voluntary Disclosure Programme.

It is anticipated that by the end of March 2018 over R3 billion will have been collected in respect of the SVDP that have been processed, with work on remaining applications continuing into the new fiscal year.

Measures to approve material cross-border transactions involving state-owned entities will be put in place.

The digital economy brings about many technological advances that have led to changes in business models.

Today, we update draft VAT regulations to cover foreign businesses selling electronic services to South African consumers.

Working closely with the Department of Trade and Industry, I have approved six special economic zones that will make qualifying companies subject to a reduced corporate tax rate, and enable them to claim an employment tax incentive for workers of all ages.

These measures will promote investment in those manufacturing and tradable services sectors that encourage exports, job creation and economic growth.

Working with the Minister of Science and Technology, Government has streamlined the administration of the research and development tax incentive.

Aside from raising revenue, the tax system is increasingly required to play a role in protecting the natural environment and promoting sustainable use of limited resources.

Parliament is currently considering the draft Carbon Tax Bill, which will assist South Africa to meet its climate change commitments to reduce our carbon emissions.

The tax will be implemented from 1 January 2019.

As with greenhouse emissions, the polluter-must-pay-principle must  also  apply  to other activities which harm the environment, like the dumping of plastics into our oceans and threatening of marine life.

Working with the Department of Environmental Affairs, we will shortly publish a policy brief to broaden the scope of environmental fiscal reform, to explore fiscal and regulatory measures to improve water resource management, mitigate the emission of pollutants and encourage recycling to reduce waste, such as plastic, which is polluting our oceans.

Madame Speaker,

Tax morality is a crucial component of a healthy democracy.

It has taken many years and lots of effort to build the foundation of trust that supports our tax morality.

We have seen how quickly that citizens’ trust can be eroded by perceptions of poor public governance.

At the SONA, the President has announced his intention to establish a commission of inquiry into tax administration and governance at SARS.

This year, government will respond to the Davis Tax Commission’s report on tax administration and introduce draft legislation to give effect to some of its recommendations, including those on the accountability of SARS to the Minister of Finance, and the establishment of a supervisory board, as well as measures to strengthen the Office of the Ombud.

Government will also take steps to implement the customs  modernisation programme currently implemented by SARS, to give effect to the new customs and excise legislation passed in 2014.