As a country, we are facing significant changes in the tax landscape, the economy, governance, and business as we know it, off the backdrop of not only rising levels of government debt, crippling interest, unemployment, and an energy crisis to name a few.

This is the view of Joubert Botha, head of tax and legal at KPMG in southern Africa, who adds: “It is these factors that set the tone for a very tough budget announcement yesterday – and to top it … in an election year.”

Botha was opening KPMG’s annual post-National Budget event 2024, which unpacked the outcomes of the national budget under the theme ‘Navigating the evolution’.

“While this year’s budget was largely uneventful, there is no doubt that businesses are facing massive shifts from an economic point of view and the elections will undoubtedly create more uncertainty as can be expected.

“Therefore, as we emerge from yesterday’s budget announcement it is evident that business needs to be able to navigate and understand the evolving tax and economic landscape – which are contributing to turbulent waters,” says Botha.

Phumlani Majozi, economist and political analyst concurs: “We witnessed a cautious government approaching this year’s budget with a ‘do what must be done’ approach in what is a difficult environment.

“We know that the economic pie is not growing. In fact, South Africa is far behind global growth and even substantially behind growth in sub-Saharan Africa. With weak household consumption, low levels of investment, and structural issues, we have an unproductive economy in fiscal trouble.

“It is our domestic structural factors that are slowing down South Africa’s economic growth and this needs to be addressed if we hope to not find ourselves in too much trouble,” Majozi adds.

South Africa’s Minister of Finance has taken a cautious approach to this ‘fix’ focusing on areas that will drive up tax revenues and try to stimulate the economy but also that will maintain foreign investment interest in the country.

However, “when we look at the objectives of the budget, it was supposed to support growth yet very few new initiatives as far as growth is concerned were announced,” says Frank Blackmore, lead economist at KPMG South Africa.

“Specifically, the infrastructure requirements of the country, both logistical and electrical. All that we could see is a continuation of the policies that have been put in place, namely, to bring in the private sector – and it looks like that may go ahead this year even though it was tabled for the first time two budgets ago.”

To create such economic growth electricity and logistics infrastructure issues need to be addressed, which appears now to be versed to the private sector to help to do through PPPs. And we need this to be supported by a growth mandate that is enabled by a conducive policy environment.

While we didn’t see enough on the economic front, the tax environment saw a few significant, but worrisome changes that will no doubt impact the shrinking middle class and taxpayers overall.

“While there was a sigh of relief for taxpayers as there were no increases announced for corporate income tax, tax value added tax or personal income tax, this is short-lived, especially for individuals who will carry the bulk of the tax bill – albeit under the proverbial radar,” says Sarika Rautenbach, partner: global mobility services and employment tax advisory at KPMG South Africa.

“Of the R738-billion generated from personal income tax, individual taxpayers contribute close to 40% of this revenue. If we consider that the year-on-year increase on personal income tax revenue is set at almost 14%, then you can see wherein lies the problem,” says Rautenbach.

Itumeleng Nkadimeng, partner: corporate tax at KPMG South Africa, comments: “We have seen a contraction of revenue collections from corporate taxpayers and so, we believe that we will witness more scrutiny into tax affairs as well as tax positions that businesses disclose to SARS, where stringent requirements will be implemented.”

Tanya Engels, partner: international tax at KPMG South Africa, adds: “There were two things that stood out for me. The first is the proposed exclusion from the assessed loss limitation rules for companies that are in the process of being wound down. This rule came into effect in the 2023 tax year, and we are starting to see the impact of this now.

“The second is the announcement that a draft Global Minimum Tax Bill will be published, which will explain how South Africa plans to implement the so-called Pillar Two rule which is the imposition of a global minimum tax of 15%. This has been long awaited given that a draft discussion document was already announced to be released in last year’s budget and so we look forward to seeing how National Treasury proposes to implement this.”

According to Roula Hadjipaschalis, partner: corporate tax at KPMG South Africa: “We witnessed subtle changes around dispute resolution – one of which was a comment on alternative dispute resolution which has been largely successful and so the government is considering giving taxpayers the option to dispute at the objection stage.

“Having a tax strategy that ensures a certain tax position, includes someone with a dispute mindset, and relies on increased technology will be important in this tax evolution – providing businesses with tax governance, accurate financial and tax data, and tax technology that speaks to accounting which are all critical in effective tax submission.”

Botha concludes: “As we move toward elections – now pegged for 29 May 2024 – we await the implementation of the key aspects of this year’s budget to unfold and see fruition in the aim of driving further economic growth and providing some relief for business and consumers alike.

“However, we know it is not going to be an easy year for business and so, we need to navigate the evolution of tax and business to remain resilient and drive forward sustainable growth.”