Ratification: Tax Treaties with Sudan, Australia

Select Committee on Finance

24 June 2008

Presented by Yanga Mputa

Tax Policy Unit : National Treasury

2

Tax Treaty Ratification Process

• Before a tax treaty can come into force, it has to be ratified by Parliament

• Ratification can only take place after the signing of the tax treaty

• In SA, ratification process is done in accordance with S231 of the Constitution read with S108(2) of the Income Tax Act

• The tax treaties presented today for ratification constitute what we believe to be the best interest of SA

3

Reasons for SA/Sudan Tax Treaty

• Economic relations

• SA foreign policy into Africa

• New tax treaty between South Africa and Sudan was signed on 7 November 2007

4

SA/Sudan Tax Treaty: Trade Flows

• Exports to Sudan– Exports to Sudan were: R302 million in 2004, R434

million in 2005, R463 million in 2006 and R718 million in 2007

– Main exports: machinery, mechanical appliances, plastics, rubber, vehicles

• Imports from Sudan– Imports from Sudan were: R5,6 million in 2004,

R632 thousand in 2005, R2,5 million in 2006 and R6,9 million in 2007

– Main imports: mineral products, machinery, mechanical appliances

5

SA/Sudan Tax Treaty: Investment Flows

• Level of investment flows between the two countries still minimal

• SA Companies Operating in Sudan– PetroSA– Transnet– Global Railway Engineering Consortium of South

Africa – MTN-Sudan

6

Reasons for SA/Australia Tax Treaty

• Protocol to the existing treaty. Tax treaty between South Africa and Australia came into force on 21 December 1999

• Proposed changes to the current tax treaty are necessary as a result of key changes to South African domestic tax legislation: Conversion of Secondary Tax on Companies (STC) to a dividend tax at shareholder level

• Implementation of the proposed STC conversion is subject to renegotiation of nine tax treaties that have a zero rate withholding tax on dividends

• Tax treaty with Australia presented in Parliament today represents one of those treaties

• The revised tax treaty also addresses certain aspects that are not

present in the old treaty

7

SA/Australia Tax Treaty: Investment Flows

• Investments by Australia– Total investments by Australia into South Africa increased from

R946 million in 2003 to to R2 billion in 2005– Australian investments in South Africa increased significantly

over the past decade mainly in the mining and agricultural sectors

– Major Australian investors in South Africa include mining company BHP Billiton and mining consultancy company RSG Global

• Investments by South Africa– Total investments by South Africa into Australia amounted to

R8,5 billion in 2003 and R8,6 billion in 2005– Major South African investors in Australia include Wesbank,

Pick’ n Pay, Woolworths, First Rand, RMB, Kumba Resources, Tiger Brands, Sappi, Murray & Roberts

8

SA/Australia Tax Treaty: Trade Flows

• Exports to Australia– Exports to Australia were: R7,15 billion in 2004, R9,7 billion in

2005 and R9 billion in 2006– Australia is one of SA largest trading partners– The majority of goods exported to Australia are finished goods

and these include high quality motor cars, e.g. BMW , Mercedes Benz and Volkswagen

• Imports from Australia– Imports from Australia were: R7,2 billion in 2004, R7,3 billion in

2005 and R9,5 billion in 2006– The majority of goods imported from Australia are primary

products such as aluminium and finished goods such as pharmaceuticals

9

Thank You