Mboweni on taxes: We'll have the largest shortfall ever, but we have a plan
While we will have the highest tax shortfall ever on record - mostly due to the COVID-19 pandemic - government has a few plans to ensure it acquires as much income as possible.
JOHANNESBURG - The pandemic, the associated lockdowns and the global slowdown have severely affected SARS revenue. However, there’s some good news in that the under-collection of revenue was not quite as bad as was predicted in the Medium Term Budget Policy Statement (MTBPS) last October.
On Wednesday, Finance Minister Tito Mboweni said South Africa would have the largest tax shortfall on record.
While tax revenue will fall almost 11% short of last February’s predictions, collections were better than expected, yielding almost R100 million more than was predicted in the MTBPS in October. That recovery meant the tax proposals tabled in June were withdrawn.
SARS would not impose any new taxes this year, but there are some changes on the cards.
From the speech:
- The corporate income tax rate will be lowered to 27% for companies with years of assessment commencing on or after 1 April 2022. The corporate income tax base will be increased by limiting interest deductions and assessed losses. Further rate decreases will be considered to make our tax system more attractive.
- Personal income tax brackets will be increased by 5%, which is more than inflation. This will provide R2.2 billion in tax relief. Most of that relief will reduce the tax burden on the lower and middle-income households. This means that if you are earning above the new tax-free threshold of R87 300, you will have at least an extra R756 in your pocket after 1 March 2021.
- Fuel levies will be increase by 27 cents per litre, comprising 15 cents per litre for the general fuel levy, 11 cents per litre for the Road Accident Fund levy and 1 cent per litre for the carbon fuel levy.
- An 8% increase in the excise duties on alcohol and tobacco products.
Treasury is still working towards lowering the corporate tax rate, a project it embarked on last year in an effort to bring South Africa in line with other global players, and make it a more attractive place to do business. The idea was always to do this in a way that didn’t cause a sudden drop in revenue.
The ceiling for contributions to the Unemployment Insurance Fund will be set from 1 March at R17,711.58 per annum.
Treasury would also relook travel and home office allowances, as well as the rules around salary structuring, after the pandemic forced many to embrace the work-from-home lifestyle. Don’t expect much immediate movement on this just yet – it’s likely to be a project run over several years, with consultations only starting this financial year.