Finance Minister Enoch Godongwana balanced austerity and relief in his maiden Budget speech to parliament on Wednesday, 23 February.
Earlier this week, predictions were that tax collections were way better than predicted. This has turned out to be R62 billion more than the government estimated just four months ago. It’s a whopping R182 billion higher than last year’s Budget.
That has created a climate for some tax relief, which totals R5.2 billion. This has also been made possible due to the fuel levy remaining unchanged.
It’s the first time since 1990 that the fuel levy hasn’t increased. Daunted by the almost R20 per litre pump price, with this brake on the fuel levy, motorists can be optimistic. Should there be a speedy resolution to the Russia-Ukraine crisis, oil barrel prices may tumble, which would translate into cheaper petrol prices for us all.
The overall improvement in tax collections is undoubtedly due to the foundations laid in the creation of the South African Revenue Service (SARS) in 1997 by Gill Marcus. This year marks the 25th year of SARS’ existence.
Tax relief for individuals has come from an adjustment by 4.5% to personal income tax brackets and rebates in line with inflation. The tax threshold or amount you earn before you start paying tax if you are under 65 increases from R87 300 to R91 250, or from R7 604 per month.
Companies will soon benefit from the drop in corporate income tax rates promised in the 2021 Budget, and they will pay 27% instead of 28%.
The domestic outlook looks gloomy as we are still recovering from the violent unrest in July 2021 and commodity prices slowing in the second half of 2021. Though we were hoping for a real growth in gross domestic product (GDP) of 2.1%, this is now unlikely to be the case.
Industrial action in the manufacturing sector and the re-emergence of loadshedding slowed the pace of our economy so that GDP growth is expected to be only 1.8%.
The usual smattering of increases in sin taxes is the hallmark of every Budget. A 340ml beer will cost 11c more. A packet of cigarettes will cost an additional R1.03, and the bottle of whiskey on our Shabbos tables will cost R4.83 more.
Added to the sin tax basket for the first time are vaping products. There is a reprieve for a few months, with a new tax to be imposed from 1 January 2023 of R2.90 per millilitre.
The tax on sugar products has been controversial, with new calls to scrap the tax altogether. Though it has been dubbed “a health-promotion levy” and has remained unchanged for three years, it will now be increased by 2.31c per gram of sugar.
The poor state of Eskom remains the focus of attention of National Treasury. It seems that Eskom is saddled with a debt bill of which the government has already provided R136 billion and a further R88 billion is committed in bailouts until 31 March 2026.
Do we fear more power outages as the minister states that Eskom is expected to take further steps towards cost containment, sale of assets, and operational improvements to enhance the reliability of our electricity supply? Perhaps we’ve heard this too many times before!
The minister has described tough love coming the way of a number of state-owned companies (SOCs). Whilst stopping short of identifying them, he has stated that National Treasury will outline the criteria for rationalisation and consolidation of these SOCs, which will be a welcome move.
So, dear Minister Enoch, our eyes are on you deliver us unto economic freedom!
