The annual budget speech by the Minister of Finance, Enoch Godongwana, will take place on the 21st of February. Every year, many South Africans hold their breaths during this speech – in anticipation of higher taxes and more bad news regarding the economy.
Read more here on the reasons for the slow economic growth rate in South Africa: https://explain.co.za/2024/01/30/why-is-south-africas-economy-growing-so-slowly/
What could South Africans expect to hear during the Finance Minister’s budget speech?
- State debt as a leading concern and the need to raise more revenue
Ania Strydom, Compliance Research Manager at PaySpace, said: “In real terms, the Minister will need to raise an additional R15 billion for the 2024/2025 fiscal year and faces a significant revenue shortfall totalling around R111 billion.”
2) Personal income tax
It is not likely that personal income tax rates will be increased at this time. The highest marginal tax rate for individuals is currently set at 45%.
3) Medical credits
According to ENS Africa’s tax experts, individuals who belong to medical aid schemes are entitled to a medical tax credit. There is also an extra medical tax credit for expenses that medical aid members have paid out-of-pocket.
“It was approximated that the total cost of this credit was R28 billion for the year 2020/2021, with an additional R7.5 billion for out-of-pocket expenses.”
ENS stated that an announcement of an adjustment to these credits is possible as “mechanisms must be considered to fund the National Health Insurance plan which has now been approved by Parliament and the National Council of Provinces.”
4) VAT and sin taxes
As reported by IOL, Professor Keith Engel, the chief executive of the professional body South African Institute of Taxation, gave his opinion on the possibility of tax increases ahead of this year’s budget speech: “My feeling in an election year there is a slim to no chance of a tax increase, especially no tax increase around VAT.” Engel also stated that “there could be increases in the other taxes such as sin tax, which refers to increases related with alcohol and tobacco sales.”
5) Social Relief of Distress grantCitizens are waiting to hear if this grant will be increased. In President Cyril Ramaphosa’s State of the Nation Address (SONA) earlier this month, he did not specify a concrete plan for the Social Relief of Distress (SRD) grant. Dr Kelle Howson, labour and social security researcher at the IEJ said: “The value of the grant has been further eroded by inflation. Because of high food inflation over the past year, Statistics South Africa increased the food poverty line by a drastic 14%, from R663 to R760. This means the SRD grant value is now less than half of the food poverty line, which denotes the minimum monthly income a person needs to meet their daily caloric intake requirements.”
Read more here on key takeaways from this year’s SONA: https://explain.co.za/2024/02/08/sona-2024-5-key-takeaways-to-know/
