A parev cholent would be the best way to describe the Budget speech made by Finance Minister Enoch Godongwana on Wednesday afternoon, 21 February, but then it’s an election year.
We’re all aware that the endemic problems in South Africa range from infrastructure to burgeoning debt, low growth predictions from the International Monetary Fund earlier this year, and of course, rampant corruption that’s hampering any improvements.
There’s no immediate panacea to crippling national debt, and the weakened mining sector, among others, is no longer ripe for the pickings for the South African Revenue Service to make easy revenue.
Furthermore, with South Africa in a crucial election year, careful strategies are demanded while taxpayers battle with increased prices and inflationary pressure.
The weak performance of our economy driven by these very issues has resulted in a collection of tax revenue in 2023 R56.1 billion lower than estimated in the 2023 Budget. The shortfall has to be made up in some way, balancing the needs of the communities at every socio-economic level.
The Budget therefore contains a clever methodology of raising a significant portion of the R15 billion in 2024/25 needed to alleviate immediate fiscal pressure and support faster debt stabilisation. In essence, this is done by keeping things the same.
Unlike in previous years where levels of tax brackets, rebates, and medical tax credits have been adjusted for inflation, this year, this won’t be the case. This means that inflationary – or other – salary increases may in fact push taxpayers into a higher tax bracket. This is a great opportunity for all the Section 18A organisations out there [whose donations may qualify for a tax refund].
Some bad news for the Haftorah club, Purim party, and Pesach wine purchases though. The minister proposes to increase excise duties on alcoholic beverages by between 6.7% and 7.2%. This means a bottle of wine will cost 63c more, and a bottle of spirits almost R6 more.
The minister kindly responded to a mail sent to him requesting an increase in the cost of hubbly bubbly, e-cigarettes, and other alternatives. He mentioned that the country had experienced an increase in the number of youth smoking these products, and parents weren’t pleased with this at all. I hope and pray that this isn’t our kids, but if it is, keep their pocket money levels the same because the Budget has tabled an increase of excise duty on electronic nicotine and vapes – to R3.04 per millilitre.
There’s also no need to stress about any major increases in fuel prices as there’s a nominal increase from 1 January 2024 on the taxes of liquid fuels from 0.66c/litre to 0.69c/litre.
It should be noted that all the Woolies bags you have should be left in your car for shopping purposes as the government proposes to increase the plastic-bag levy from 28c/bag to 32c/bag from 1 April 2024.
And if anyone hasn’t yet switched to LEDs to make their solar/inverter/generator more efficient, the government is raising the incandescent light-bulb levy from R15 to R20 per light bulb from 1 April 2024.
On the exchange control front, there’s no good news for those looking to make aliya or any other emigration plans. You can still use your R1 million travel allowance. There’s a slight relaxation for South African private equity funds to invest offshore up to R5 billion. And for those trading internationally, the local banks have a little more leeway in their treatment of related party transactions cross border.
In short, the Budget failed to address specific infrastructure needs, and certainly hasn’t offered an increase in the number of products in the basket of zero-rated goods. We should, however, be grateful that no additional taxes were instituted.
As expected in an election year, we sit with a parev presentation from a government trying to hold things together and not upset too many people.
- Jonathan Altman is a tax adviser at Zeridium.
