On 12 April 2018, the Davis Tax Committee (DTC), issued a media statement (Media Statement) in which it announced the publication of four additional final reports and the conclusion of its work based on its Terms of Reference (ToR).

The four reports that were released on the same day are:

• The “Final report on VAT for the Minister of Finance”;
• the “Report on the efficiency of South Africa’s corporate income taxCorporate Tax refers to the tax imposed by governments on the income or capital of corporations. Corporations, considered separate legal entities, are taxed on their profits, meaning the income generated from their operational activities, investments, and other financial undertakings. This tax is generally a key revenue source for governments, helping to fund public services, infrastructure, and other essential functions. The... system for the Minister of Finance”, along with a separate note on territorial taxation;
• the “Report on the public benefit organisation and the tax system for the Minister of Finance”; and
• the “Report on the feasibility of a wealth tax in South Africa for the Minister of Finance”.

According to the Media Statement, the reports are based on the mandate of the DTC as per its ToR and the publication of these reports concludes the work of the DTC, which started on 17 July 2013 when the DTC was appointed by the Minister of Finance. According to the Media Statement, the DTC held its last meeting on 27 March 2018 and also published the “Closing report on the work done by the Davis Tax Committee”, which is essentially a summary of the work done by the DTC since its establishment (Closing Report).

The Closing Report

The Closing Report notes that the operating costs (excluding premises and Secratariat costs borne by SARSThe South African Revenue Service (SARS) is the official tax authority responsible for the administration and enforcement of tax laws in South Africa. It plays a crucial role in managing the country’s fiscal policy by collecting revenue, administering customs, and ensuring compliance with tax legislation. Established under the South African Revenue Service Act, No. 34 of 1997, SARS functions independently...) of the DTC was R12,380,000, for the five-year period that it was in existence. In terms of the Closing Report, the DTC submitted 25 reports to the Minister of Finance, which have all been published on the DTC’s website with the approval of the Minister of Finance. Using the ToR as its point of departure, the DTC established 12 sub-committees, with members and various ad hoc members, during its existence to fulfil its mandate. The Closing Report sets out the progress made by each of the various sub-committees.

Progress made by DTC sub-committees and implementation of certain recommendations

The Closing Report also sets out, among other things, the extent to which the recommendations made by various sub-committees had already been implemented. For example, the sub-committee on base erosion and profit shifting’s recommendations for s6quin of the Income TaxIncome Tax is a direct levy imposed by governments on the income generated by individuals, corporations, and other entities within a specific jurisdiction. It serves as a major source of revenue for governments and funds various public expenditures, such as infrastructure projects, healthcare, education, national security, and welfare programs. The tax is generally calculated as a percentage of the taxable... Act, No 58 of 1962 (Act) to be repealed and for s10(1)(o)(ii) of the Act to be reviewed, were implemented by National Treasury and SARSThe South African Revenue Service (SARS) is the official tax authority responsible for the administration and enforcement of tax laws in South Africa. It plays a crucial role in managing the country’s fiscal policy by collecting revenue, administering customs, and ensuring compliance with tax legislation. Established under the South African Revenue Service Act, No. 34 of 1997, SARS functions independently... accordingly. Taxpayers should note for example that the amendment regarding s10(1)(o)(ii), will only come into effect on 1 March 2020. It is also interesting to note that pursuant to the work of the sub-committee on estate duty and CGTCapital Gains Tax (CGT) is a tax imposed on the profit an individual or entity earns from the sale or disposal of a capital asset. This tax is not levied on the total sale price of the asset but rather on the capital gain, which is the difference between the asset’s acquisition cost (or “base cost”) and its sale price.... implications, the Minister of Finance accepted one of the DTC’s recommendations in the 2018 Budget Speech by announcing an increased estate duty rate of 25{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} that will apply to an amount in excess of a dutiable amount of R30 million in an estate. This amendment will apply from 1 March 2018, although the legislation giving effect to this amendment, still needs to be passed by Parliament.

Themes emerging from consultations

The Closing Report states that the twelve sub-committees consulted widely and that a number of themes emerged from the DTC’s consultations with various stakeholders. Some of the most interesting themes that emerged include the following:

• The role of the tax system in South Africa must be considered in a holistic context ie its main mandate is to collect revenue for the state and it cannot be used to address all impediments to economic growth and job creation – this requires a coordinated “whole of government approach” in consultation with business and labour;
• tax legislationTax laws form the backbone of any nation’s revenue system, setting the rules that govern how individuals and corporations contribute financially to support government functions. These laws define the types of taxes, the applicable rates, and the regulations regarding payment and compliance. They also outline the rights and obligations of taxpayers, ensuring a balanced and fair approach to funding public... has become farFunctional analysis is the cornerstone of transfer pricing and international tax compliance, ensuring that intercompany transactions adhere to the arm’s length principle. It evaluates the roles, contributions, and risk profiles of entities within a multinational enterprise (MNE) to determine how profits and costs should be allocated. This process ensures that related-party transactions reflect the pricing that independent enterprises would establish... too onerous and complicated and the associated tax complianceTax Compliance refers to the adherence of individuals and businesses to the tax laws and regulations of a specific jurisdiction. It encompasses the timely and accurate filing of tax returns, the payment of tax liabilities, and ensuring that all tax-related obligations are met as stipulated by legislation. Compliance involves more than just submitting tax forms; it includes maintaining accurate financial... and reporting requirements are becoming too burdensome and expensive to comply with – there is a need for simplicity and certainty to encourage local and foreign direct investment;
• to what extent can the tax system contribute to behavioural changes that contribute to economic growth, employment creation, development and fiscal sustainability?; and
• taxpayers need assurance and indications that their taxes are being spent prudently and invested in the best interests of the country.

Challenges faced and concluding remarks

The Closing Report also makes mention of some of the challenges faced by the DTC, including the political uncertainty that arose due to six different Ministers of Finance being appointed, while the DTC was in existence.

In its conclusion, the Closing Report notes that the DTC and its sub-committees held 205 meetings and received 433 submissions in an effort to consult widely. It issued 23 media statements and held seven workshops to further engage with the public. The DTC also presented progress reports on two occasions to the Standing Committee on Finance in Parliament.

Importantly, the Closing Report notes that, as mentioned in the ToR, “the Committee is advisory in nature, and will make recommendations to the Minister of Finance.” Therefore, it remains to be seen whether the proposals of the DTC will be implemented in future. This, only time will tell.