Tax changes proposed by National Treasury and the South African Revenue Service (SARS) will have no significant impact on agriculture, believes Theo Vorster, the chief executive of Galileo Capital.
Vorster says it will, however, have a lesser impact on assessed losses for agricultural businesses.
His interview with Food For Mzansi follows after the latest tax bills were opened for public comment. It includes the Rates and Monetary Amounts and Amendment of Revenue Laws Bill, the Taxation Laws Amendment Bill and the Tax Administration Laws Amendment Bill.
These tax proposals were first announced in former finance minister Tito Mboweni’s budget speech on 24 February 2021. Among the proposals, National Treasury and SARS have included restrictions on assessed losses that can be carried forward by a business into the next financial year.
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This means that businesses may have to pay more tax. For example, if a business made a R200 000 loss in one year, they would normally carry forward the whole amount into the next financial year.
If the business happened to make a R200 000 profit in that year, it would essentially cancel out the loss of the previous year and they would not be taxed on profits.
‘Don’t make hasty decisions’
Going forward, based on the proposed tax changes, businesses will only be able to carry forward 80% of their assessed losses. So, if you made a loss of R100 000 in one year, you can only carry forward R80 000. That means the hypothetical profit of R100 000 made in the next year would be reduced to R20 000, which is taxable. This amendment will be effective from 1 April 2022.
Vorster believes that farmers don’t have to worry too much nor make rash decisions based on the tax proposals at this point in time.
“Those things are very small, and the impact will be limited on farming operations. So, farmers don’t have TO talk to their tax advisors or their auditors.”
He added that even the proposed restriction on assessed losses for businesses, which Treasury created to reduce the corporate income tax rate from 28% to 27%, will not significantly impact farmers.
“None of the proposed taxes are directly impacting on farmers. I wouldn’t change anything I do in terms of my normal business decisions based on the proposed changes that Treasury has published. There are changes but I don’t think that it is something that the farmer should be worried about,” he says.
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