Finance Minister Tito Mboweni did not offer many surprises in his supplementary budget today, which aims to rebalance government spending and create a framework for economic growth in the post-Covid landscape.
By Yolandi Esterhuizen, registered tax practitioner and compliance manager at Sage Africa & Middle East
We did not see many measures geared towards offering additional relief for employers and employees, nor did we see any dramatic tax raising measures.
These may come in the 2021/22 Budget Speech in February next year. For now, here are some of the points from today’s speech that are worth noting:
* Personal income tax receipts are down. With many small businesses shutting down, large organisations retrenching people and many employers unable to pay salaries in the wake of Covid-19, personal income tax revenues will be under pressure for a while yet. Despite the speculation about a wealth tax or higher taxes for high income earners, these options would have been complex to implement in the middle of a tax year. It’s not surprising that we did not hear anything today for that reason. However, tax increases are necessary to stabilise debt, and we are likely to see an increase in personal income taxes announced in the February 2021 budget speech.
* Unemployment remains one of South Africa’s biggest challenges. The emergency budget speech mentioned that the Presidential Youth Employment Intervention and the repurposed public employment programme will be rolled out over the medium term and that an additional R19.6 billion has been set aside for this purpose. I did hope to hear about a possible extension for the TERS (temporary employer/employee relief scheme) since many small companies are struggling, even if the lockdown has been eased somewhat.
* In the February budget speech, the Minister said government was planning to broaden the corporate income tax base and use the additional revenue to reduce the corporate tax rate. Today’s speech confirmed that these measures (restricting net interest expense deductions, and limiting the use of assessed losses carried forward) will be postponed to at least 1 January 2022. This means businesses will need to wait for relief from a lower corporate income tax. During this time, where businesses need relief more than ever, this is a pity.