CAPE TOWN – Finance Minister Tito Mboweni on Wednesday took heed of South Africa’s call for tax relief and announced no major tax increases when delivering his 2020 National Budget Policy Statement.
Mboweni said this was in a bid to support growth and further stated that there was some real personal income tax relief.
“This Budget means that a teacher who earns on average R460 000 a year, will see their taxes reduced by nearly R3 400 a year. Hard-working taxpayers, who earn on average R265 000 a year, will see their income tax reduced by over R1 500 a year.
“Our income tax system is progressive, and the adjustments reflect this. Someone earning R10 000 a month will pay 10 per cent less in tax. Someone earning R100 000 a month will pay about 1.5 per cent less,” said the minister.
Mboweni’s tax relief move is in line with recommendations by market analysts who had suggested that increasing taxes was not the way to go.
Investec chief economist Annabel Bishop said in a note on Tuesday that hiking taxes – instead of cutting expenditure and thus the debt trajectory – would negatively impact consumers and, in turn, corporates facing these consumers, such as retailers, risking higher unemployment.
“The net effect would be for a further dwindling in real disposable (after-tax) income growth, which has been a key driver for the slowdown in economic growth in South Africa,” said Bishop.
Market watchers also urged him to offer concrete measures to boost exports and support small and medium enterprises while cracking down on corruption in state departments and entities.
Mboweni also proposed broadening the corporate income tax base to source additional revenue that would be used to reduce the corporate tax rate in the near future to help South African businesses grow.
Highlighting that start-ups would ignite the economy Mboweni said: “The tax system supports them in several ways, including the preferential small business tax regime, the VAT registration threshold and the turnover tax. We will review these to improve their effectiveness while at the same time reducing the scope for fraud and abuse.”
BUSINESS REPORT