The Minister of Finance, Enoch Godongwana’s maiden budget speech gave South Africans a few reasons to celebrate, while also extending a hand to foreign investors, in an attempt to get the country’s economy back on track.
Godongwana delivered his budget speech on Wednesday afternoon, and threw floundering taxpayers a slight lifeline by not increasing tax rates.
Below are some of the key takeaways from his 2022 budget review:
No increase in personal income tax rates:
Godongwana indicated that government was hoping to spare already overburdened taxpayers any further increases. He noted that increases in top tax rates yielded such marginal returns that it would be better to broaden the tax base instead.
Reduction of Corporate tax rates
Big business is also receiving some reprieve, as corporate tax rates are to be reduced by one percentage point.
Government hopes this would make South Africa more attractive to foreign investors.
The reduction will bring tax rates down to 27% and is effective for tax years ending in March 2023.
No increase in fuel levies:
In what must have triggered a sigh of relief from all motorists, the minister announced no increase in both the general fuel levy or Road Accident Fund levy.
These levies have seen consistent increases every year and contribute a large percentage to the high fuel price.
In addition, Godongwana said they are also in negotiations with the energy department to review the country’s fuel pricing model.
Tougher action against wealthy tax dodgers:
The minister floated the idea that all provisional taxpayers with assets exceeding R50 million in value declare their assets and liabilities in next year’s tax returns.
This will allow for the detection of non-compliance and point the revenue collector’s watchdogs in the right direction.
He might not have used the term sin tax anymore, but in a blow to the liquor industry, duties on alcohol are expected to increase by 4,5% to 6,5%.
Similarly, the tobacco industry will see an increase in duties by 5,5% – 6,5%.
Both these industries were nearly crippled by bans during the Covid-19 pandemic lockdown, and had lobbied hard, to no avail, for some breathing room and a pause in excise duty increases.
Increased capacity for Sars:
The revenue service is being capacitated, and to this end 490 additional staff members have been added to the books, and R430 million spent to make sure it can do its job effectively.
In pursuit of enforcing the recommendations of the State Capture Commission report, the tax man is also beefing up its enforcement abilities.
Eskom to remain an albatross:
Godongwana said that while a portion of the power utility’s debts will eventually be taken over by Treasury, the company must first increase its efficiency and shed some of its assets (including power stations) and improve its cost containment and improvement of operations.