South Africa’s Finance Minister, Enoch Godongwana, delivered his budget speech to the nation in Parliament on Wednesday.
SOUTH Africa’s Finance Minister, Enoch Godongwana, delivered his budget speech to the nation in parliament on Wednesday.
The minister announced that the weak performance of the country’s economy resulted in a sharp deterioration in tax revenue collection for 2023/24.
“At R1.73 trillion, tax revenue for 2023/24 is R56.1 billion lower than estimated in the 2023 Budget. The shortfall is largely due to the decline in corporate profits and revenue from taxes on mining. Over the medium term, revenue projections are R45.6 billion higher than the 2023 MTBPS estimates which increased personal income tax and additional medium term revenue proposals,” Godongwana said.
“This budget contains tax measures that will raise R15 billion in 2024/25 to alleviate immediate fiscal pressure and support faster debt stabilisation. Revenue is mostly raised through personal income tax by not adjusting the tax brackets, rebates and medical tax credit for inflation,” he said.
For alcohol products excise duties, above-inflation increases of between 6.7 and 7.2% for 2024/25 are proposed.
This means:
- A can of beer increases by 14 cents;
- A can of a cider and alcoholic fruit beverage goes up by 14 cents;
- A bottle of wine will cost an extra 28 cents;
- A bottle of fortified wine will cost an extra 47 cents;
- A bottle of sparkling wine will cost an extra 89 cents; and
- A bottle of spirits, including whisky, gin or vodka, increases by R5.53.
“We also propose to increase tobacco excise duties by 4.7 per cent for cigarettes and cigarette tobacco, and by 8.2 per cent for pipe tobacco and cigars,” he further added.
This translates to:
- A R9.51 cents increase for cigars;
- A 97 cents increase to a pack of cigarettes; and
- An extra 57 cents for a pipe of tobacco.
E-cigarattes
“You will be happy to hear then, that we are tabling an increase of the excise duty on electronic nicotine and non-nicotine delivery systems, known as vapes, to R3.04 per millilitre. On environmental taxes, the carbon tax increased from R159 to R190 per tonne of carbon dioxide equivalent as of 1 January 2024. The carbon fuel levy will increase to 11 cents per litre for petrol and 14 cents per litre for diesel effective from 3 April 2024. A discussion paper outlining proposals for the second phase of the carbon tax will be published for public comment later in the year,” the minister said.
“We are mindful of the already high cost of living and the impact fuel prices have on food and transport costs. In this regard, we are proposing no increases to the general fuel levy for 2024/25. This will result in tax relief of around R4 billion. This is money back in the pockets of consumers.Progress has been made on the two-pot retirement system since I last addressed you during the MTBPS. Contributions to retirement funds will be split, with one-third going into a “savings component” and two-thirds going into a “retirement component”. From 1 September 2024, the first cash withdrawals could be made from the savings pot. The two-pot system ensures that we strike a balance between preserving contributions to safeguard a better retirement for members, while addressing the plight of the people to access some of their retirement funds to help ease their financial burdens in times of distress,“ the minister added.
“Over the next few years, we are also implementing a global minimum corporate tax to limit the negative effects of tax competition. Multinational corporations with annual revenue exceeding €750 million will be subject to an effective tax rate of at least 15 per cent, regardless of where their profits are generated. The proposed reform is expected to yield an additional R8 billion in corporate tax revenue in 2026/27. I encourage interested parties to provide comments on the draft Global Minimum Tax Bill published today. Our long-term tax policy strategy remains focused on broadening the tax base while improving tax compliance and administrative efficiency,” he said.
The minister went on to say that visible progress has been made in rebuilding and modernising SARS.
“The tax authority has expanded the tax register, improved debt collections and reduced fraudulent refunds and trade valuations. This has led to improvements in revenue collection. To address the high levels of illicit tobacco, SARS is deploying CCTV and related technologies at licensed tobacco manufacturers. Investigations and prosecutions have resulted in R10 billion in additional assessments from the key players in the illicit gold and tobacco industry, of which over R4 billion from key players in the illicit gold and tobacco industry. These and other efforts have assisted with the improvement in revenue,” he said.
“Our bigger challenge, as I have stated earlier, is that our pie is not growing fast enough and this limits our ability to generate sufficient revenues to distribute among our priority areas,” Godongwana further said.
* Read Finance Minister Enoch Godongwana’s full Budget Speech here
– BUSINESS REPORT
