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By Alec Hogg
- SA’s total tax revenue exceeded the February 2021 Budget Speech estimate by R182bn at R1.55trn. A year ago revenue had been estimated at R1.4trn, which was adjusted to R1.5trn in November’s MTBPS. Year-on-year revenue growth in revenue was 24% (2021: R1.25trn).
- Improved revenue is primarily due to improved commodity prices, with corporate tax receipts from mining companies accounting for most of the increase. Without this, a similar revenue outcome would have required an increase of at least six percentage points in either Personal Income Tax rates, or the VAT rate.
- Corporate income and profit has been more resilient than anticipated and collection of both personal income tax and VAT has been above expectations.
- Net tax relief of R5.2bn is projected for the fiscal year to end February 2023.
- Personal income tax brackets and rebates will be adjusted downwards by 4.5% to neutralise the impact of inflation pushing taxpayers into higher brackets. Without this adjustment for “fiscal drag”, Treasury would have received R13.5bn more from taxpayers.
- As a result of these adjustments the level where income tax now starts becoming payable increases to R91,259 per annum (R7,679pm).
- The bigger share of this, R3bn, is due to the saving of R3,5bn from not increasing deductions for the general fuel levy and Road Accident Fund. With the oil price raising at-pump costs of fuel, tax as a percentage of a litre of petrol falls from 41% to 34% and diesel from 45% to 38%, a ratio below that of India and Mexico. In Europe the average is 60%.
- The other R2.2bn in tax relief is concentrated on an expansion of the employment tax incentive where the maximum monthly value increases by 50% to R1,500.
- Sin taxes will increase once more, delivering an estimated R400m more from alcohol and R100m via tobacco duties. The carbon tax rate increased from R134 to R144 per ton from 1 January 2022. The levy on plastic bags is raised from 25c to 28c and the incandescent light bulb levy will rise from R10 to R15 for each globe from 1 April 2022.
- Personal income tax will contribute 41% of the total tax take this year; up from 38% two years ago. VAT will contribute 31%, up from 25% in 2020.
- The higher revenue receipts contracted SA’s Budget Deficit to 5.7% of GDP from the originally anticipated 7.8%. Projections are for 6% in 2023 and 4.2% in 2024.
- The Covid-19 social relief grant has been extended for a further 12 months.
- Government expects to achieve a primary surplus (revenue higher than non-interest expenditure) by 2024 – a year earlier than expected.
- As announced in the 2021 Budget Speech, the corporate income tax rate will be reduced to 27% from 28% this year for companies with tax years ending on or after 31 March 2023. SA’s rate still significantly exceeds the OECD average of 23%.
- Real public debt per person living in South Africa is now R69,291. This is more than triple the R22,869 it was at in 2009. Servicing the interest on this debt has now become the biggest single item on the national budget. Gross debt is projected to stabilise at 75% of GDP in 2025.
- The economy is expected to reach pre-pandemic levels of GDP this year. Real GDP growth recovered from 2020’s contraction to 4.8% in 2021 and is projected at 2.1% in 2022 and averaging 1.8% over the three years to 2025, moderately higher than had been projected in November’s MTBPS.
- The rebuilding of SARS is evidenced in the recruitment of an additional 490 staff and the investment of R430m in modernising its ICT infrastructure. The new unit focused on high net worth individuals is “taking shape”. Over R5bn was collected through enforcement activities against criminals and illicit activity. SARS has implemented the majority of the Nugent Commission recommendations.
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