Tax plan to boost key industries

The maritime and manufacturing sectors in KwaZulu-Natal are set to get a major boost from tax incentives proposed by the National Treasury.

They are part of a raft of changes to tax laws to bolster industrialisation.

The changes presented in the Treasury’s 2013 draft Taxation Laws Amendment Bill and the Tax Administration Laws Amendment Bill were put out for public comment last week.

They reveal more details on the tax proposals announced by Finance Minister Pravin Gordhan when he presented the Treasury’s “2013 Budget Review” to Parliament during his budget speech in February.

They will benefit companies located in new special economic zones for industrial development.

KZN is home to the country’s busiest port, Durban, and the largest bulk port, Richards Bay.

The special economic zones would be in Richards Bay and at Dube TradePort.

The Treasury said the plans included, among other things:

- A beneficial tax regime for companies in special economic zones approved by the Minister of Finance.

- Proposals to revitalise the maritime sector through implementation of an attractive tax regime.

The Treasury was contemplating an “exemption for international shipping transport entities”.

“This would exempt qualifying shipping companies from income tax, capital gains tax, dividends tax, and withholding tax on interest,” it said.

“This tax relief would form part of the integral policy alignment by the Department of Transport to revive the maritime sector.

These complete exemptions are more favourable than the initially proposed tonnage tax for South Africa.”

The Department of Trade and Industry (DTI) had identified the lack of targeted tax incentives as one of the hindering factors to the success of Industrial Development Zones (IDZs).

“In support of the dti’s broader initiative to improve governance, streamline procedures and provide more focused support for industry, it is proposed that companies operating within special economic zones will be eligible for a favourable tax dispensation,” it said.

However, companies wanting to qualify were required to be approved by the finance minister after consultation with Trade and Industry Minister Rob Davies.

“All businesses operating within approved special economic zones will be eligible for accelerated depreciation allowances on capital structures and an employment incentive.

“Certain companies (carrying on qualifying activities within an approved zone) will be subject to a reduced corporate tax rate (15 percent instead of 28 percent). All special economic zones will qualify for VAT and customs relief similar to that for the current IDZs.”

The business sector and the public have until August 5 to comment on the bills.

Further meetings would be held, if necessary, before they are revised and presented to Parliament.

Andrew Layman, chief executive of the Durban Chamber of Commerce and Industry, said it would take part in the public comment period and correspond with Treasury on the tax changes.

The chamber welcomed some of the changes, but would need more details before commenting.

“It would be interesting to see what the real benefits of the maritime incentives would be, but, without doubt, more tax incentives are needed to make the government’s planned new special economic zones work and attract major investment,” he said. - The Mercury