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RTV202 - SU1 - Summary
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Study Unit 1 - Introduction to Taxation and Calculation of Net Tax Payable
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STUDY UNIT 1:PART ONE: INTRODUCTION TO TAXATION
Why taxes are imposed:
- To raise revenue to fund general expenditure such as education, housing, health, security, and economic development.
OBJECTIVES:
Understand the concept of taxation
Identify the criteria for a good tax system
Identify the key Tax Acts and taxes levied in SA
Explain the role of SARS and the Tax Ombud
Identify the two main sources of tax law
Explain how tax law is interpreted
INTRODUCTION
Taxation is not unique to SA
Taxes are levied in almost every country in the world – main objective: is to raise revenue to fund government
expenditure.
In addition, SA has the following broad tax policy objectives: (See separate document)
- Social objectives: building a cohesive and inclusive society through a progressive tax system and raising
revenue to redistribute resources.
- Influence behavioural changes: The tax system can encourage certain actions for example savings ( Section
11F and 12 T of the ITA) and discourage others for example smoking (Excise duty).
- Facilitate economic growth: Using taxes and tax incentives to encourage higher levels of investments
- Correction of market failures/(environmental challenges for example climate changes, pollution) : Carbon
tax levy
CRITERIA OF A GOOD TAX SYSTEM – 3
The four basic criteria/ principles/canons of a good tax systems proposed by Adam Smith (an economist in 1776) is still
relevant today for drafting tax policies and critically evaluating legislation.
Equity – citizens should contribute towards expenditure of government for benefits that they enjoy according
to their abilities.
In SA progressive tax system for natural person meet this criterion - the higher the person’s income, the
higher the tax rate that is used to calc. the tax liability
Certainty – time, manner, quantity to be paid should be clear and ascertainable to taxpayer.
In SA criteria met by legislation and public notices.
Convenience – time/manner to be convenient to pay
Example: Inclusion of VAT in the selling price of goods and services.
Economy – minimal compliance cost ito money, time and effort.
Example: Annual submission of income tax returns instead of monthly.
1
, TAXATION IN SOUTH AFRICA
Consumption
Income Taxes Wealth Taxes Other Taxes
Taxes
Levied on Levied on goods/services Levied on transfer of On specific business
Levied on
earnings/profits Levied on
Examples: Levied on transfer of
wealth transactions
Levied on specific
earnings/profits
Examples: goods/services
Value-added Tax (VAT) wealth
Examples: Examples:
business transactions
Examples:
Normal tax FuelExamples:
levies Examples:
Donations tax Stamp duty
Examples:
Dividend
Normal
tax tax Customs
Value-added Tax
& excise duties Estate Donation tax
duty Skills development levy
Stamp duty **
Dividend
Withholding
tax tax (VAT) ** Transfer
Estate
duty duty
Skills development
Turnover
Withholding
tax tax Fuel levies ** Transfer duty **
levy
Turnover tax Customs & excise
duties **
BROAD CATEGORIES OF TAXES – 3
** Also classified as indirect tax that is levied on transactions as opposed to direct tax that is paid directly by the person on
whom it is levied for example normal tax
KEY TAX ACTS
Taxes are levied ito legislation:
2
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