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Bailey McCann, Opalesque New York:

The tax treatment of derivatives can have a profound impact on business decisions for fund managers in South Africa, according to the delegates at the recent Opalesque South Africa Roundtable. Going forward, they argue, a review of the tax treatment of derivative products will be important to keep the industry moving forward. Speaking at a recent Association for Savings and Investment South Africa (ASISA), Steve Smith a member of ASISA underlined this point when he mentioned that discussion around the derivatives, the revenue or capital discussion should not be a discussion about what's happening in the funds; it should be a discussion about the products themselves.

At the Opalesque Roundtable, Andy Pfaff, Commodities Fund Manager, MitonOptimal Group added - "I believe this is a typical example of collateral damage, the unintended consequences phenomenon. If you look at commodities, for example, you run into the current built-in conflict that exists between the instrument definitions and the tax treatment of derivatives."

"The taxman treats all derivatives profits as income – that’s a well-established practice. But look at the definitions of tradable instruments. A commodity manager is prohibited from trading something that is deliverable, or the underlying commodity itself - only cash settled instruments are permissible. That means that a co......................

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