NO SIGNIFICANT tax changes are expected in next week’s Budget Review, as the revenue overrun is forecast to be more than R200 billion higher than the original Budget estimate.
PwC said yesterday that South Africa’s fiscus would continue benefiting from a high corporate income tax this year, buoyed by a long rally of elevated commodity prices. In his Medium-Term Budget last year, Finance Minister Enoch Godongwana revised upwards the revenue for 2021/22 by R120bn to reach R1.485 trillion compared to R1.365trillion in February 2021.
For the 2022/23 fiscal year, the Treasury estimated tax revenues at R1.527trillion, only 2.8 percent higher than the estimate for the 2021/22 year.
PwC head of tax policy Kyle Mandy said yesterday that this revised estimate was still conservative in their view.
In a pre-Budget webinar, Mandy said the 2021/22 fiscal year had seen a remarkable recovery in tax revenues after falling R175bn short, as a result of the Covid-19 pandemic.
In February last year, former finance minister Tito Mboweni withdrew new tax measures to raise R40bn, citing the need to support the pandemic-afflicted economy’s recovery.
Mandy said PwC expected that actual tax revenues could come in up to R200bn higher, assuming that the strong performance in corporate income tax collections continues through March. “By far the biggest contributor to the surplus is corporate income tax, which could exceed the original Budget estimate by about R12bn, driven by the resources sector due to high commodity prices.
“Personal income tax collections are also performing relatively strongly and could exceed the original Budget estimate by about R40bn. VAT also continues to perform better than anticipated and could exceed the original Budget estimate by about R10bn.”
Mandy said this R200bn revenue windfall would give the Treasury the space to fund the extension of the R350 a month Social Relief of Distress (SRD) grant, the public sector wage bill, and debt repayments.
Owing to this optimistic revenue forecast, Mandy said they hoped that the Treasury would not increase taxes.
“Given the better-than-expected performance in revenues, we do not expect to see significant changes in taxes, similar to the position adopted in the Budget 2021,” Mandy said.
“The National Treasury is in a position to adopt tax policies that are supportive of economic growth,” he said.
However, Mazars South Africa expects that as an alternative to a general VAT increase, a special VAT rate may be applied to a number of products that currently have a zero rating.
Mazars’s national head of taxation, Mike Teuchert, cautioned against undue optimism with regard to tax revenue exceeding targets.
Teuchert also questioned whether the fiscus was in a position to offer a universal basic income grant seeing that the relevance of the SRD grant may be waning as Covid-19 was tapering off.
He said that the ultimate question the government needed to ask itself was whether an income grant would solve the unemployment crisis.
“There has to be a mechanism for government to incorporate unemployed people into the real economy, which involves creating jobs and instilling pride in work and earn a living.”
siphelele.dludla@inl.co.za
BUSINESS REPORT ONLINE