There have been mixed reactions to Minister of Finance, Enoch Godongwana’s annual budget speech this week.
The general feeling is that while the financial manoeuvrings by National Treasury are commendable, there appears very little faith in government’s ability to do what needs to be done to put the country back on track.
In this podcast Maya unpacks the annual budget speech with the help of Thomas Lobban from Tax Consulting South Africa.
Despite settling R254bn of Eskom debt, government is not planning on future tax increases, but is rather focusing on containing expenditure. Here are some key points from the annual budget speech.
There are no major tax increases planned and the Budget Review states that “government intends to avoid tax increases while the economy is recovering from recent shocks.” This budget has provided some tax relief.
Tax tables will be adjusted for inflation with the tax-free threshold increasing from R91 250 to R95 750.
There will be no increase in the fuel levy or Road Accident Fund levy this year, but there will be a 1c increase per litre for carbon tax. That means the total taxes collected per litre will be R6.17 for petrol and R6.03 for diesel.
The medical tax credit increases from R347 to R364 for the first two members and from R234 to R246 for additional members. That means a family of four who belong to a medical scheme would have a combined medical tax credit of R1 567 a month or R18 804 a year.
No transfer duty will apply on a property purchased up to the value of R1.1 million.
A member of a retirement fund who makes a withdrawal prior to retirement will not pay tax on the first R27 500 of the withdrawal. On retirement, the member will not pay tax on the first R550 000 of the amount withdrawn.
Government announced tax relief of R4bn for households and R5bn for companies for the installation of solar panels or renewable energy. Businesses will be able to claim a 125% deduction in the first year for all renewable energy projects. Households will qualify for a tax rebate of 25% of the purchase price of solar panels to a maximum of R15 000. For example, if 10 solar panels are purchased for R40 000, an individual’s personal tax liability will decrease by R10 000. This will only apply to purchases between 1 March 2023 and 29 February 2024.
Usual sin taxes
So-called sin-taxes will increase 4.9%, in line with inflation. Tax collected on a pack of cigarettes will be R20.80, R2.16 on a can of beer and R3.90 per bottle of wine. Those who enjoy their sparkling wine pay R12.48 of tax per bottle.
While government has made a R36bn provision for the continuation of the R350 a month Covid social relief-of-distress grant until 31 March 2024, there has been no decision made regarding a more permanent basic income grant. According to the Budget Review, “any permanent increase in expenditure such as a new social grant, will need to be matched by permanent revenue increases or spending reductions elsewhere.”
The grant for pensioners 75 years and younger, and the disability grant, both increase to R2 085 per month. Pensioners over the age of 75 and war veterans will receive R2 105. The child support grant increases to R505.