The Minister of Finance Enoch Godongwana has delivered his 2022 national budget speech, with millions tuned in to listen to the fate of the country's financial future.
So what does that mean for us tax-wise?
The personal income tax brackets and rebates have been adjusted by 4.5 percent in line with inflation providing relief by increasing the tax threshold for a person under 65 from R87 300 to R91 250. The Minister also stated that the medical tax rebate will increase from R332 to R347 per month for the first two members and from R224 to R234 per month for additional members.
One of the biggest attractions in the budget speech this year is the announcement that the corporate income tax rate is to be reduced from 28% to 27%. However, the restructuring of the CIT system is proposed in a manner that will not affect the net revenue collection.
The reduction of the CIT rate being reduced to 27% will become effective for tax years ending after 31 March 2023.
The rationale behind the decrease in the CIT rate is the desired impact it should have on investor behaviour. Hoping the reduction is a step in the right direction of both enticing domestic investors to keep their money within the country and international investors to invest in South African businesses with the aim of boosting the economy as well as cash inflows.
Investor behaviour will influence jobs, wages, and prices and can support economic growth.
In December 2021 South Africa experienced a fuel increase that set the price of fuel to above R20 per litre. The highest the cost of fuel has been in South African history. Government realised that the increase in fuel prices has placed pressure on the cost of transport, food, and other goods and services placing a strain on many households. The Minister of finance has stated that the fuel price will not increase during 2022/23 providing tax relief of R3.5 billion to South Africans. The carbon fuel levy will however increase by 1c to 9c per litre for petrol, and 10c per litre for diesel from 6 April 2022.
We cannot forget about the Carbon Tax rate. The carbon tax rate will increase from R134 to R144 which has come into effect since 1 January 2022 as required by legislation.
So, what about the old favourite sin tax? The increase in excise duties on alcohol and tobacco is not surprising when you bear in mind that the WHO is trying to reduce the consumption of both products, and since South Africa is a signatory to the WHO, South Africa has increased the levy on alcohol and tobacco by between 4.5 and 6.5 percent.
Employee tax incentives will be expanded through a 50% increase in the maximum monthly value of R1500.
As we save for our retirement, the security of knowing how the funds will be treated is of great importance when we look to our future. Changes have been proposed to enable greater investments in infrastructure. The amendments are to be gazetted next month.
Several tax incentives received the axe in this year's budget speech which will not be renewed after they reach their sunset date. These include:
- Section 12DA (rolling stock) on 28 February 2022
- Section 12F (airport and port assets) on 28 February 2022
- Section 12O (films), which lapsed on 31 December 2021
- Section 13sept (sale of low‐cost residential units through an interest-free loan) on 28 February 2022.
The Government has also picked up a few anomalies that were addressed in the speech which they are fixing as fast as Usain Bolt can run.
The positive side to the anomalies picked up is that in connection to section 24, the debtor's allowance provisions to limit the impact on lay-by arrangements were also reviewed and will be expanded to defer tax implications on lay-buy arrangements.
Government however will continue to retain incentives that help them achieve their objectives and ensure that they achieve their budget goal by the collection of tax.
The Minister has introduced what seems to be a relief for the country but is that just smoke and mirrors to pacify the people who still have to deal with Eskom and further corruption in the country?
One has to think about whether the relief will be realised in the efforts put forward by the Minister to achieve a more stable and sustainable financial position.