Ratification: Tax Treaties with Sudan, Australia

1. 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