Even though a major limitation of this research report is the fact that the final recommendations of the Davis Tax Committee with regard to Estate Duty and other wealth taxes have not yet been published at the hand-in date of this report, the case study framework that was created can easily be reused to test the effect of the Committee’s final recommendations once they are announced. Once the final recommendations are made available, case studies at various levels of estate and trust values could also be performed to analyse the effect of the recommendations on smaller estates as well.
The conclusion reached from the case studies performed in this report is that the various recommendations, as they currently stand, may not result in a reduction of aggressive estate planning strategies but that it may rather have the opposite effect, especially if high- net-worth estates are involved. If, however, the intention is also to reduce excessive capital growth in order to help reduce the persistent high levels of overall inequality in South
Africa, as advocated by Thomas Piketty, then these recommendations may well help to achieve this. Taxpayers may, however, not take such an aggressive reduction of their capital wealth lying down. It will also be interesting to see how the final recommendations will affect resident beneficiaries of non-resident trusts. Although the use of non-resident trusts by South Africans fell outside the scope of this study, the case studies may also be expanded to test the effect of the recommendations on such scenarios.
With regard to the contentious issue of possible double taxation on death as a result of both CGT and estate duty being due, it is hoped that SARS and the National Treasury will be able to provide a more detailed breakdown of the CGT collected in the annual Tax Statistics publications in future years which includes a breakdown of CGT paid on death as well. Based on the high-level statistical information provided in the DTC’s First Interim Report on Estate Duty and the study performed by National Treasury regarding the
combined effective tax rate on death also included in this report it does seem as if some detailed information may already be available in this regard. If far-reaching changes to estate duty legislation and the taxation of trusts are going to be enacted in the future, then such statistical information will be useful to have for comparative purposes and to see if the enacted legislation does in fact succeed in increasing estate duty collections and in clamping down on excessive use of trust structures.
Given the detail required to be provided in the new trust tax return forms (ITR12T) SARS may also already be in a position to integrate and analyse all the information collected in those forms in order to clamp down on trusts where clear abuses may be taking place or where not all distributed taxable income is given up in the tax returns of beneficiaries. There remains a number of legitimate non-tax reasons for the use of trusts and it is hoped that the eventual legislation enacted with regard to the tax treatment of trusts will not make it overly costly from a tax point of view to enter into such a structure where it is genuinely required to do so.
Collections of estate duty is and will remain a very small component of overall revenue collections and as can be seen from the recently enacted increase in the capital gains inclusion rate for all entities, the Receiver may well opt for other means to increase their revenue collections from the wealthy which are easier to implement than an overhaul of long-established trust taxation and estate duty legislation.
8
References
8.1
Acts
South Africa, 1955, Estate Duty Act, No. 45 of 1955, Government Printer, Pretoria. South Africa, 1962, Income Tax Act, No. 58 of 1962, Government Printer, Pretoria. South Africa, 1965, Administration of Estates Act, No. 66 of 1965, Government Printer, Pretoria.
South Africa, 1970, Subdivision of Agricultural Land Act, No. 70 of 1970, Government Printer, Pretoria.
South Africa, 1988, Trust Property Control Act, No. 57 of 1988, Government Printer, Pretoria.
South Africa, 2008, Companies Act, No. 71 of 2008, Government Printer, Pretoria.
South Africa, 2011, Tax Administration Act, No. 28 of 2011, Government Printer, Pretoria. South Africa, 2012, Rates and Monetary Amounts and Amendments of Revenue Laws Act, No. 13 of 2012, Government Printer, Pretoria.
South Africa, 2015, Rates and Monetary Amounts and Amendments of Revenue Laws Act, No. 13 of 2015, Government Printer, Pretoria.
8.2
Bills
South Africa, 2016, Rates and Monetary Amounts and Amendments of Revenue Laws Bill (Draft), Government Printer, Pretoria.
8.3
Government reports
Davis Tax Committee, 2015, First Interim Report on Estate Duty, viewed 15 July 2015, from
http://www.taxcom.org.za/docs/20150723%20DTC%20First%20Interim%20Report%20o n%20Estate%20Duty%20-
%20For%20public%20comment%20by%2030%20September%202015.pdf
Department of National Treasury, Republic of South Africa & South African Revenue Services (SARS), 2013, 2013 Tax Statistics, viewed 10 November 2015, from
http://www.treasury.gov.za/publications/tax%20statistics/2013/TStats%202013%20WEB. pdf
Department of National Treasury, Republic of South Africa & South African Revenue Services (SARS), 2014, 2014 Tax Statistics, viewed 10 November 2015, from
http://www.treasury.gov.za/publications/tax%20statistics/2014/TStats%202014%20WEB. pdf
Department of National Treasury, Republic of South Africa & South African Revenue Services (SARS), 2015, 2015 Tax Statistics, viewed 3 February 2016, from
http://www.treasury.gov.za/publications/tax%20statistics/2015/TStats%202015%20Inside %20WEB.pdf
Department of National Treasury, Republic of South Africa, 2015, Estimates of National Expenditure 2015, viewed 10 November 2015 from
http://www.treasury.gov.za/documents/national%20budget/2015/ene/FullENE.pdf
Department of National Treasury, Republic of South Africa, 2016a, Budget Review 2016, viewed 24 February 2016 from
http://www.treasury.gov.za/documents/national%20budget/2016/review/FullReview.pdf
Department of National Treasury, Republic of South Africa, 2016b, Estimates of National Expenditure 2016, viewed 24 February 2016 from
http://www.treasury.gov.za/documents/national%20budget/2016/ene/FullENE.pdf
Katz Commission, 1994, Report of the Katz Commission into Tax Reform, viewed 11 November 2015, from http://www.polity.org.za/polity/govdocs/commissions/katztoc.html Katz Commission, 1997, Fourth interim report of the commission of inquiry into certain aspects of the tax structure of South Africa – capital transfer tax, viewed 11 November 2015, from http://www.treasury.gov.za/publications/other/katz/4.pdf
Margo Commission, 1987, Report of the Commission of Inquiry into the Tax Structure of the Republic of South Africa, RP34, The Government Printer, Pretoria.
8.4
SARS publications
South African Revenue Service, 2015a, Comprehensive Guide to Dividends Tax, February 2015.
South African Revenue Service, 2015b, ABC for Capital Gains Tax for Individuals (Issue 8), April 2015.
South African Revenue Service, 2015c, Comprehensive guide to Capital Gains Tax (Issue 5), December 2015.
8.5
Books
Cameron, E., De Waal, M., Wunsh, B., Solomon, P. & Kahn, E., 2002, Honoré’s South
African Law of Trusts, 5th edn., Juta Law, Lansdowne.
Clegg, D. & Stretch, R., 2015, Income Tax in South Africa, viewed on 12 August 2015, from My LexisNexis.
De Koker, A.P. & Williams, R.C., 2015, Silke on South African Income Tax, viewed 11 November 2015, from My LexisNexis.
Financial Surveillance Department of the South African Reserve Bank (‘SARB’),
Exchange control manual, viewed 10 June 2015, from
https://www.resbank.co.za/RegulationAndSupervision/FinancialSurveillanceAndExchang
eControl/EXCMan/Pages/default.aspx
Honiball, M. & Olivier, L., 2009, The Taxation of Trusts in South Africa, SiberInk, Cape Town.
Meyerowitz, D., 2008, Meyerowitz on Income Tax, The Taxpayer, Cape Town. Maisto, G. (ed.), 2010, Death as a taxable event and its international ramifications, Cahiers de droit fiscal international, vol. 95b(2), pp. 17-60, The Hague, Netherlands: Sdu Uitgevers.
Pace, R.P. & Van der Westhuizen, W.M., 2014, Wills and Trusts, viewed 11 November 2015, from My LexisNexis.
Piketty, T., 2014, Capital in the Twenty-First Century, Harvard University Press, USA.