Page Timing concerns 3 Section 45 4

2. Contents • Page • Timing concerns 3 • Section 45 4 • Other matters 5

3. Timing concerns • First two batches of draft legislation issued for comment on 31 July 2008, after close of business • Comment to PCoF by midday 13 August (though extended period to 29 August for comment to Treasury/ SARS) • 8 ½ days only • Third batch still awaited • Limited opportunity for public comment • No opportunity for PCoF consideration • Tabling of bills in final form scheduled for 16 September

4. Summary of proposed changes to section 45 and impact thereof • Over broad trigger for de-grouping charge not rectified (clause 43(d)) • Preamble retained - was intended only as “stop-gap” fix from Taxation Laws Amendment Act of 2008 • Quantum of de-grouping charge (clause 43(d)) • Scope for double taxation • Operation unclear • Precluded circumstances (clause 118) • Amendment to clause 56(1)(d) of Revenue Laws Amendment Act 2007 • Welcomed correction of anomaly regarding effective date • No correction regarding overbroad application in so far as relates to preference shares (pseudo debt) • Beyond scope of explanatory memorandum and explanation to PCoF • Need to understand concern surrounding the use of preference shares as consideration

5. Other matters • Issues with concert of ‘contributed tax capital’ (clause 6(1)(b)) in terms of; • Non-residents; • Impact on non-contributing shareholders; • Treble taxation; • Lack of ordering rules • Passive holding companies (clause 13) • Escape clause whereby distribute taxable income is impossible to achieve • Removal of paragraph 78(2) & (3) of Eighth schedule (clause 78) • Subdivisions/ consolidations/ conversions • Conflicting views exist • Certainty demands written confirmation – legislation preferable to SARS practice/ interpretation/ ruling