![]() Discovery Vitality encouraged by the revised sugar tax design announced by Finance Minister Pravin Gordhan in his 2017 Budget Speech. In response to the proposed sugar tax, Dr Craig Nossel, Head of Vitality Wellness said: “We believe that action is required to reduce the intake of sugary drinks, and support the proposed sugar tax. From a health point of view, it is excellent news that sugar content will remain the base on which the tax is applied – this encourages reformulation and the availability of drinks with a lower sugar content. We are also pleased to hear that some of the revenue generated from the proposed tax will be used to support health-promotion programmes aimed at non-communicable diseases. We have much to do as South Africans to combat the increasing prevalence of obesity in our country, and the sugar tax is a step in the right direction.” There are a number of reasons Discovery Vitality supports the Government’s proposed introduction of a sugar tax. In South Africa, obesity is ranked as one of the top five risk factors for early death, and years lived with disabilities[i]. Excess sugar consumption is clearly linked to obesity[ii], which is the number one risk factor for chronic diseases of lifestyle, also known as non-communicable diseases (NCDs), like diabetes and heart disease. It is estimated that NCD-related deaths globally will outnumber deaths from communicable, maternal, and perinatal deaths by 2030. South Africans are among the top 10 consumers of sugary drinks in the world[iii]. Studies also show that we continue to increase our consumption of sugary drinks: A study on Food consumption changes in South Africa since 1994’[iv] shows that the total intake of sugary drinks – carbonated and fruit juice – increased by 68.9% between 1999 and 2012. Research shows that drinking too many sugary beverages leads to an increased risk for obesity, particularly concerning for children and adolescents. This is because sugary drinks are a significant source of added sugar but do not make you full. Generally, people do not eat less to compensate for the extra calories they drink[v]. Obesity is rising Between 1980 and 2008, the prevalence of obesity worldwide doubled. With almost 40% of women and 11% of men classified as obese[vi], South Africa has the highest obesity rate in Sub-Saharan Africa. Rising obesity rates, which evidence demonstrates is the key cause of the pandemic of NCDs, are mainly caused by changes in our diet, work and leisure time. Specific drivers include energy-dense, nutrient-poor diets, physical inactivity, large portion sizes and irresponsible food advertising. Obese individuals incur 30% higher medical costs than their counterparts with a healthy weight Research published in the South African Medical Journal on the relationship between levels of obesity and medical expenses[vii] among South Africans on a medical scheme show that obesity is strongly associated with significantly increased healthcare expenditure. Severe obesity, this study indicated, increased healthcare expenditure by R4 425 for each person, split between inpatient and outpatient care. Recent Discovery Vitality research gathered from HealthyFood Benefit data, which specifically looked at the impact of sugar purchasing (specifically from sugary drinks) on healthcare costs, supports the findings of the medical scheme study. The analysis showed that an increase in sugar purchasing (from sugary drinks) was associated with a 4.1% increase in healthcare costs over a 3-year period from 2014 to 2016. The research also showed that members who started off consuming a greater amount of sugar had healthcare costs that were 2.9% higher than for the rest of the members by the end of the period. Cooperative efforts are needed to ensure policy changes are effective A multi-pronged approach is required to achieve a change in population behaviour and health. Discovery Vitality has gathered a significant amount of scientific and anecdotal evidence over the last twenty years, which points to the successful application of behavioural economics, and the power of education and wellness intervention programmes. The HealthyFood Benefit, which offers members up to 25% cash back on a range of healthy foods (specifically selected to address high risk dietary practices that are associated with NCDs including diabetes, high blood pressure and high cholesterol), is one such example. Over time, Discovery Vitality has found that incentivising members to make healthier choices positively influences their purchasing behaviour; an increase in the purchasing of fruit, vegetables, and whole-grain foods, and a reduction in the purchasing of high-sugar, high-salt, processed, and fried foods[ Apply for your Vitality or the Healthy food benefit on Vitality contact Namhla in our Health, email [email protected], tel (011)658-1333 Source: Discovery
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![]() With this year’s National Budget, as announced by Minister Pravin Gordhan on Wednesday 22 February 2017, the following fast facts as it relates to the healthcare industry are highlighted for your attention
Source: Resomed ![]() INCOME TAX Individuals and special trusts A new top bracket has been introduced for personal income tax - individuals’ taxable income above R1.5 million per year will be taxed at 45%. Previously, the top bracket of 41% was set at R701 301. The new top marginal income tax bracket is accompanied by partial relief for bracket creep 1. The personal income tax rates for the 2017/2018 tax year are listed below. Companies and trusts
TAX RATE The income tax rate for companies has remained unchanged at 28%, while the income tax rate for trusts (other than special trusts) has increased to 45%. TAX THRESHOLDS Tax thresholds have increased to: R75 750 for taxpayers younger than 65 R117 300 for taxpayers aged 65 to below 75 R131 150 for taxpayers aged 75 and older REBATES The primary rebate (deductible from tax payable) has increased to R13 635 per year for all individuals. The secondary and tertiary rebates have increased to: R7 479 for taxpayers aged 65 and older R2 493 for taxpayers aged 75 and older INTEREST EXEMPTIONS Interest exemptions have remained unchanged at: R23 800 per annum for individuals younger than 65 years R34 500 per annum for individuals 65 years and older MEDICAL TAX CREDITS Monthly tax credits for medical scheme contributions will increase from: 1.R286 to R303 per month for the person who pays the contributions and the first dependant on the medical scheme 2.R192 to R204 per month for each additional dependant Bracket creep occurs when the income tax tables are not fully adjusted for inflation, and inflationary salary adjustments increase an individuals’ effective tax rate, reducing real income. As the increases to taxable income brackets, the tax thresholds, and the rebates are below the expected level of inflation, taxpayers will face a real increase in their effective personal income tax rate in 2017/2018. INTEREST WITHHOLDING TAX (IWT) AND DIVIDEND WITHHOLDING TAX (DWT) Interest Withholding Tax (IWT) on interest from a South African source payable to non-residents has remained unchanged at 15%. Interest is exempt if payable by any sphere of the South African government, a bank or if the debt is listed on a recognised exchange. Dividend Withholding Tax (DWT) on dividends paid by resident companies and by non-resident companies for shares listed on the JSE has increased from 15% to 20%, effective 22 February 2017. The exemption and rates for inbound foreign dividends have also been adjusted in line with the new local DWT rate, resulting in a maximum effective rate of 20%. TAX-FREE SAVINGS ACCOUNTS The annual limit on contributions to tax-free savings accounts has increased from R30 000 to R33 000. RETIREMENT LUMP SUM TAXATION At retirement: The retirement lump sum tax table is unchanged. The table below illustrates how retirement lump sums will be taxed. Click to read more If you have any queries on your personal or business tax, contact our Finance Department, email [email protected], tel (011)658-1333 Source: Allan Gray ![]() Budget 2017 was unusual due to the tough economic environment in 2016 and SA narrowly having avoided going into recession, according to independent economist Sandra Gordon. She was the guest speaker at the monthly networking forum of the Western Cape Business Opportunities Forum (WECBOF) on Wednesday evening. "The slow SA economy has led to little revenue, which put a squeeze on Treasury. Ratings agencies are concerned that SA is building up debt so quickly and the country sits right on the line between being investment grade or junk," said Gordon. "If SA is downgraded to junk status it will raise the cost of borrowing. It can take up to seven years to get out of junk status. Budget 2017 was, therefore, so tight and constrained that the consensus is that SA won't be downgraded in the first half of 2017." Treasury has indicated that the path SA is on at the moment is not sustainable. That leaves the question of how economic transformation could be achieved. "Budget 2017 was more of a political vision. Resources are so limited that there is not much government can do for SMEs until the economy gets better," said Gordon. "That is why I think it is not worth waiting for government to do something for SMEs." At the same time, she said there is an improved economic outlook for 2017. This could mean that interest rates are cut later this year or early next year. "Entrepreneurs should be aware of how things are changing," concluded Gordon. Written by : Carin Smith Source: Fin24 ![]() “In these tough times we draw strength from the resilience and diverse capabilities of our people, our business sector, our unions and our social formations.”Pravin Gordhan, Budget Speech 22 February 2017 Personal tax
Business and trusts
Employers
Retirement reform
Other tax proposals
![]() There is one day I look forward to in my calendar as a Financial Advisor, and that is the publication of the Annual Raging Bull Awards. This morning after I dropped my son Enxuan at the gym for his swimming session, I rushed to the local Pick n Pay store to buy a copy of the Saturday Star, to read about the hot-off-the-press Personal Finance section, which focuses on the 2016 Raging Bull Awards. I already know more or less who the winners are likely to be, the usual suspects of Allan Gray, Nedgroup, PSG etc, as I monitor the developments of larger fund managers closely. But it is still important to get the official results. So here it is: The winner is Allan Gray, second place PSG, third place Nedgroup Investments. Below is the full list. PlaxCrown ranking of management companies to December,2016 ![]() I did an analysis of the past winners, dating back to 2007. It looks like this: Allan Gray has won five times, Coronation 3 times, Nedgroup once, and Stanlib once. If I give the winner 3 points, the runner-up 2 points, and 3rd place 1 points, and tally the points over the 10 years, it gives an interesting picture of the consistently best larger fund managers in South Africa: Allan Gray: 20 points Nedgroup Investments: 13 points Coronation: 12 points Prudential: 7 points PSG: 4 points Allan Gray and Nedgroup Investments have been strong performers for a long time. PSG certainly is becoming a strong contender. Coronation has been underperforming over the last 12 months, but given its experience and depth of investment skills, it will make a comeback sometime. Prudential was featured prominently in the top 3 between 2007 to 2010, but since then it may be finding the competition heating up, now reducing to number 4 or 5. The analysis above does not mean managers not mentioned above are not worthy of consideration. Veterans like Investec and Old Mutual have some good funds worth considering. Boutiques like Rezco and Truffle also have some good offering. But the headline in the newspaper is true, "Larger and Mostly Independent Asset Managers Dominate Raging Bull Awards." Asset managers under insurance companies have consistently struggled to break into the top 5 positions. Should you require assistance and advice on what funds to invest in contact Thato or Kevin , tel 011-658-133, or email [email protected] Source: Kevin Yeh ![]() In the march newsletter we will be focusing on on the 2017 Budget speech. This month we look predictions made by experts. Below is an article on views by Analyst before the budget speech. In the mini budget last year, Finance Minister Pravin Gordhan explained that additional revenue would be sourced through various tax increases. This is in the face of slowing economic growth and falling tax revenue collection. Analysts, senior economist at KPMG South Africa, Muziwethu Mathema and Grant Thornton’s director and leader tax Eugene du Plessis share their expectations of where they think Gordhan will find the “additional” revenue. Personal Income Tax (PIT) KPMG: PIT accounts for 35% of tax revenue. In SA, higher income individuals pay a higher proportion of tax, which means Gordhan would increase taxes for these high income earners to generate significantly higher revenue. This can be through the introduction of a 45% marginal tax rate for individuals earning above R1.5m per annum. Treasury could raise between R75bn and R10bn through this approach. Grant Thornton: To avoid a VAT hike, increasing the tax rate for higher income earners is likely. Treasury may add a percentage to the top tier bracket. Or government may reduce the bracket creep adjustment, but this may result in a higher effective tax rate. If the bracket creep adjustment is chosen, to compensate for higher inflation pushing up income into higher brackets, it could offset or avoid a VAT increase. Corporate Income Tax (CIT) KPMG: Treasury is unlikely to raise CIT given the weak macro-economic environment. Increasing the CIT rate will be uncompetitive. SA’s current statutory tax rate is already higher than most tax jurisdictions, Treasury could lower the tax rate to attract investment. Value-added Tax (VAT) KPMG: SA’s VAT rate is low compared to other tax jurisdictions. A one percentage point increase in VAT could generate R15bn in additional revenue. However raising VAT could have a negative impact on inequality, real GDP growth and inflation, according to the Davies Tax Commission First Interim report. Grant Thornton: Treasury may be considering a VAT increase. If this happens government would have to take measures to minimise the impact of a VAT increase on poor households, for example through increasing social grants. An alternative option would be to introduce a dual or multiple-rate VAT system, where VAT is increased on luxury items and be lower on other items, and maintain a zero rate on basic items. But the costs related to the administration of this approach outweighs the benefits. There may also be a political fallout following the increase in VAT. Specific Excise Tax KPMG: Treasury is likely to introduce higher-than-inflation increases in sin taxes, which could generate between R5bn and R7bn. But increasing this tax may result in an increase in black market consumption. The sugar-sweetened beverages tax could generate between R2.5bn and R4bn. However the job losses incurred in this second may negatively impact PIT and CIT tax bases. Grant Thornton: The proposed sugar tax is supposed to come into effect on 1 April 2017, but the process is still underway. The tax may be deferred and is unlikely to contribute to the fiscus any time soon.
Fuel levy KPMG: Treasury is not likely to increase the fuel levy. The higher crude oil prices also limit Gordhan from increasing the levy. The fuel levy could raise between R5bn and R7bn. Grant Thornton: An increase in the fuel levy could be another source of revenue. Although this may negatively impact poor households, it would be much “easier to sell” than a VAT increase. Other adjustments KPMG: Gordhan could provide reduced tax relief to short-term revenue. In Budget 2016, Treasury raised R7.6bn through this option. Failure to give tax relief over a sustained period is regressive. Gordhan may introduce adjustments to wealth-related taxes, similar to last year’s property taxes. Grant Thornton: The Special Voluntary Disclosure Programme, which involves exchange control and tax relief, may raise funds. The Davis Tax Committee is also looking at interest-free or low interest loans made to a trust will. Under certain circumstances where this results in donations, tax must be paid. But this is unlikely to make an impact on tax revenue collection this year. The committee is also considering the viability of wealth taxes. There may also be new measures related to transfer pricing and common reporting standards to avoid illicit transfer of funds to ensure tax revenue collection. Written by: Lameez Omarjee Source: Fin24 |
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