Finance Minister Nhlanhla Nene
Photo by: Duane Daws
South Africa’s tax system is deeply consultative with major taxes taking many years to implement and minor changes allowing two opportunities during the budget cycle of a year before legislation is brought to parliament, according to Finance Minister Nhlanhla Nene.
“Tax policy and tax legislation need to provide certainty to business. For this reason, tax policy needs to be boring and where new taxes come into being, like the carbon tax or mining royalty, we take a deeply consultative approach over many years before we legislate and implement the new measures,” Nene told the Bureau for Economic Research conference in Johannesburg on Monday.
He pointed to the establishment of the Katz Commission in the early days of South Africa’s democracy and most recently the Davis Tax Committee headed by Judge Dennis Davis as examples of improving consultation. Nene noted that the consultations tend to receive views from those affected by proposed changes and thus provide a narrow view. He singled out independent economists as a group that does not particularly engage in tax consultations.
Last week, committee chairperson Davis told Parliament that the country’s tax system had helped to reduce inequality, but could not solve the country’s problems on its own. He also told parliament that the country should consider adding an annual wealth tax to its current capital gains tax.