The implementation of the new dividend tax as from April 2012, the new medical schemes contribution tax credits as from March 2012, the increasing frequency of employer reconciliations, increased level of information required for reporting, and request to provide supporting documentation, are all examples of a growing administration burden.
But Sean Segar from Nedgroup Investments, says one of the disappointments of this year's Budget was that the exemptions on interest received were not raised and there "were hints that these may be scrapped altogether in the near future".
They would be replaced by "tax-preferred savings and investments accounts" to "encourage a new generation of savings products", but this move could leave many savers worse off.
These vehicles would generate completely tax free returns from interest, capital gains and dividends with annual contributions limited to R30,000 per taxpayer, but would be capped out at R500,000, largely excluding many taxpayers who break that limit and thereby actually serving as a dis-incentive to save.
Yet the interest rate exemption is one of the few remaining tax breaks - at R45,600 for a couple and R22,800 for a single person - and have encouraged low risk saving.
Segar said the high level of investment in interest generating investments illustrated just how much the interest exemption encouraged saving. Morningstar figures show R250 billion invested in money market unit trust funds, R30 billion in property unit trusts, and a further R135 billion invested in other income unit trust funds.
"Most of these investors are individuals who, by my calculations, would be worse off under the proposed scheme," said Segar.
His research shows a married couple with no other taxable income can invest R3.140 million in money market funds at 5.5%, without paying any tax on interest.
A married couple both over 75 years old, with no other taxable income, can invest a whopping R5.232 million between them, without paying any tax on interest.
All interest earned in a retirement fund is also tax free, resulting in low risk money market and income funds offering reasonable returns with a degree of capital preservation.
"The proposed tax preferred savings and investment accounts come at a time which is witnessing the demise of the once thriving dividend income fund sector. Many investors opted for dividend income funds without first taking advantage of their tax exemptions. Investors will be hoping that the alternative to the current tax-free interest income caps takes longer to implement like most of the other government initiatives in this space, because following the surprise 15% rate of the dividend withholding tax there are not many options for tax effective yield."
The South African Institute of Professional Accountants (SAIPA) notes that a growing administrative tax burden is being shifted on to tax practitioners and taxpayers, which will require more planning and preparation.
Segar's argument is to plan ahead by taking advantage of any breaks while they still last - the expected implementation date for the new saving vehicles in 2014.
Etienne Retief, chairperson of the National Tax (Policy) and SARS/National Treasury Stakeholders (Operations) Committees at SAIPA, says that in the past few budgets the minister of finance made several announcements that substantially change the existing tax regime in several areas - and a big one is that the Tax Administration Bill will come into force during 2012.
"During the past year SARS have implemented many new administrative and compliance procedures, such as the VAT review and IT14SD returns, to name but a few. The additional burden shifted onto tax practitioners and taxpayers will mean that more planning and preparation should be engaged before filing a return."
As a result of this trend, Retief advises taxpayers to plan for their growing tax administration properly.
"Fulfilling your tax obligations is no longer something you can deal with on an ad-hoc basis. Tax compliance must be integrated into the planning, risk management and accounting processes in order to ensure it has the right level of resourcing."
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