Finance Minister Enoch Godongwana’s maiden budget speech gave South Africans a few reasons to celebrate, while also reaching out to foreign investors in an effort to get the country’s economy back on track.
Godongwana delivered his budget speech on Wednesday afternoon, offering a small lifeline to struggling taxpayers by not raising tax rates.
Below are some of the key points from his budget assessment for 2022:
No increase in personal income tax rates:
Godongwana said the government hoped to spare already overburdened taxpayers further hikes. He noted that increases in the top tax rates produced such marginal returns that it would be better to broaden the tax base instead.
Reduction of corporate tax rates
Large companies will also get some reprieve as corporate tax rates are cut by one percentage point.
The government hopes this will make South Africa more attractive to foreign investors.
The reduction will bring tax rates to 27% and will be effective for tax years ending March 2023.
No increase in fuel taxes:
In what must have caused a sigh of relief from all motorists, the minister announced no increase in either the general fuel tax or the Road Accident Fund levy.
These charges have steadily increased each year and are a major contributor to the high fuel price.
In addition, Godongwana said they are also negotiating with the energy department to review the country’s fuel pricing model.
Tougher action against wealthy tax evaders:
The minister put forward the idea that all provisional taxpayers with assets exceeding R50 million in value declare their assets and liabilities in next year’s tax return.
This will make it possible to detect non-compliance and point the revenue collector’s watchdogs in the right direction.
He may have stopped using the term sin tax, but to top it all off for the beverage industry, excise taxes on alcohol are expected to rise by 4.5% to 6.5%.
Likewise, the tobacco industry will see a 5.5% – 6.5% increase in excise taxes.
Both 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 the tax hikes.
Increased capacity for Sars:
The tax authorities are being empowered and 490 additional staff have been added to the books for this purpose and R430 million has been spent to ensure it can do its job effectively.
To enforce the recommendations of the State Capture Commission report, the taxman is also strengthening its enforcement capabilities.
Eskom remains an albatross:
Godongwana said that while some of the power company’s debts will eventually be taken over by Treasury, the company must first increase its efficiency and divest some of its assets (including power plants) and improve its cost control and business improvement.
Eskom has managed to accumulate R392 billion in debt over the past ten years, but is still unable to maintain its aging coal-fired power plants. Utility mismanagement has resulted in nearly a decade and a half of tax cuts, severely damaging the country’s economic growth.
The company has now received R136 billion to pay off its debt. Another R88 billion is set aside until 2025-26.