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Finance Minister Tito Mboweni has snubbed the tax doomsayers in his 2020 Budget address.
In a nutshell:
- No tax increases in the coming fiscal year beyond a modest rise in the fuel levy (25c a litre) and the usual increases in booze and smokes (4.4% to 7.5%). Electronic cigarettes (vapes) will be taxed from 2021.
- Mboweni says pundits who expected a VAT increase have misread Government’s messages. He says there is little scope to increase taxes without pushing the South African economy deeper into the mire.
- There is fractional relief on personal income tax with the R12bn impact of fiscal drag being offered through a R14bn effective drop in inflation-adjusted tax rates. This net benefit of R2bn is to be funded through a carbon tax (R1.75bn) and a plastic bag levy (R250m) which is increased to 25c.
- The annual contribution to tax-free savings accounts has been increased by R3,000 to R36,000 from March 1.
- Section 12I tax incentive relating to industrial policy projects will not be renewed beyond March 2020. This is not to be confused with the popular venture capital company tax incentive, 12J, which has a sunset clause of 30 June 2021 which is subject to review.
- Loopholes and tax incentives for companies have been targeted in various ways:
- Net interest expenses will be restricted to 30% of earnings after January 2021 in a specific measure to combat tax avoidance by multinationals.
- Sunset clauses are being adopted on incentives dealing with airport and port assets, rolling stock and loans for residential units.
- There will be no extension of tax benefits beyond the six Special Economic Zones already approved.
- More than 18m people now receive social security payments. Their grants will increase by between R20 and R80 per month in the year ahead. A change in the way social security is administered has saved R1bn a year.
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