Highlights 2022/2023 National Budget
“NOW IS NOT THE TIME TO INCREASE TAXES AND PUT THE RECOVERY AT RISK!”
Our Minister of Finance, Mr Enoch Godongwana has delivered his first maiden budget speech for the 2022 / 2023 fiscal year on Wednesday, 23 February 2022.
Tax rates for the coming tax year 2022 / 2023 are set to remain largely the same (other than for inflationary related adjustments to personal income tax tables and the usual increases to excise taxes).
Detailed below are some of the highlights from the 2022 National Budget Speech
Economic outlook and budget framework:
- Revenue collections for 2021/2022 have been significantly better than initially projected, largely as a result of windfalls from the mining industry due to higher commodity prices.
- Main budget revenue is projected to be at R1,58 trillion or 24.7% as a share of Gross Domestic Product (“GDP”) in 2022/23.
- Real GDP growth of 2.1 percent is projected for 2022. Over the next three years, GDP growth is expected to average 1.8 percent.
- Government debt has reached R4,3 trillion and is projected to rise to R5,4 trillion over the medium term.
- The consolidated budget deficit is projected to narrow from 5.7 per cent of GDP in 2021/22, to 4.2 per cent of GDP by 2024/25.
- Debt-service costs are continuing to increase. This year, South Africa is budgeting to spend R301 billion on debt service costs alone. Roughly 19 cents out of every Rand collected will go towards servicing interest.
- Personal Income Tax: Personal income tax brackets and primary, secondary and tertiary rebates will be increased by 4.5%, in line with inflation. The annual tax-free threshold for those under 65 years will increase to R91250.
- Medical Scheme Fees Tax Credits: The value of the medical tax credit is proposed to increase by inflation from R332 to R347 per month for the first two beneficiaries. The monthly credit for the remaining beneficiaries is proposed to go up from R224 per month to R234 per month.
- Corporate Income Tax Rate: For companies with years of assessment ending on or after 31 March 2023, the corporate income tax rate will reduce to 27%. The reduction will be funded by limiting the interest deduction and assessed losses.
- Fuel Levies: The general fuel levy and Road Accident Fund Levy will not be increased.
- Excise Duties: There will be an increase in excise duties on alcohol and tobacco of between 4.5% and 6.5%. In addition, government proposes a new tax on vaping products of at least R2.90 per millilitre from 1 January 2023.
- Employment Tax Incentive (“ETI”): The ETI will be increased by 50% to R1,500.To address abuse of such incentives, government proposes to impose understatement penalties on reimbursements that are improperly claimed in terms of this incentive.
- Capital Gains Tax: No changes are proposed to the capital gains inclusionary rates.
Further important budget proposals to note:
- Variable remuneration: Amendments are proposed to be made to provisions relating to the taxation of variable remuneration to ensure wider application of these rules – particularly to the informal sector.
- Contributed tax capital: Given concerns raised by the public in relation to proposals by government to amend the definition of “contributed tax capital”, the effective date for such amendments will be postponed to 1 January 2023 to allow more time for government and stakeholders to consider the impact thereof.
- VAT on electronic services: Government proposes to review the current regulations relating to electronic services that are subject to VAT to account for further developments in this area. It is furthermore proposed that a specific exception for VAT registration be enacted in respect of once-off electronic services by non-resident suppliers to a recipient in South Africa.
- Provisional tax: Government proposes a review of the provisional tax system on the basis of international developments. A discussion paper is intended to be issued in this regard.
- Tax compliance status abuse: SARS has noted increased abuse in that taxpayers may file an inaccurate return in order to obtain a tax clearance. SARS will be reviewing the processes surrounding the issue of tax clearances as well the declaration of the returns in order to curb this abuse.
- Disclosure of wealth: Provisional taxpayers with business interests are required to declare their assets (based on their cost) and liabilities in their tax returns each year. To assist with the detection of non‐compliance or fraud through the existence of unexplained wealth, it is proposed that all provisional taxpayers with assets above R50 million be required to declare specified assets and liabilities at market values in their 2023 tax returns.
We, as PKF SA continue to keep up to date with legislation so that we can take the compliance burden off your hands. Kindly speak to one of our PKF SA partners/tax partners and specialist tax advisors to understand how these new proposals impact both your business and personal tax positions.