An employment tax incentive to support young job-seekers and personal income tax relief of R7 billion are among the highlights of the 2013 Budget, tabled by Finance Minister Pravin Gordhan on Wednesday.
Taking its cue from the National Development Plan (NDP), completed in 2012, the R1.15 trillion budget also proposes spending cuts of R10.4 billion, employment incentives for special economic zones, and tax relief for small businesses.
Gordhan said economic growth was projected at 2.7 percent in 2013, 3.5 percent in 2014, and 3.8 percent in 2015.
The budget provided for consolidated spending of R1,15 trillion, and revenue of R985,7 billion, for an expected deficit of 5.2 percent, dropping to 3.1 percent in 2015/16.
The current account deficit was expected to average 6.2 percent over the next three years
Gordhan said a review of the tax policy framework -- and its role in supporting the objectives of inclusive growth, employment development, and fiscal sustainability -- would start this year.
Following careful consideration of inputs from various stakeholders, a revised youth employment incentive would be tabled in the National Assembly, together with a proposed employment incentive for special economic zones.
From March 2014, an employer's contribution to retirement funds on behalf of an employee would be treated as a taxable fringe benefit in the hands of the employee.
Individuals would from that date be allowed to deduct up to 27.5 percent of the higher of taxable income or employment income for contributions to pension, provident, and retirement annuity funds, with a maximum annual deduction of R350,000.
Contributions above the cap would be carried forward to future tax years.
Gordhan said the 2013 Budget took the NDP as its point of departure.
“The strategic plans of government and the medium-term expenditure plans will be aligned to realise our objectives,” he said.
Government had taken measures to control growth in spending, and spending plans had been reduced by R10.4 billion through re-prioritisation, savings, and a draw-down on the contingency reserve.
Government remained committed to the large-scale infrastructure investment programme.
The path of spending and the recovery in revenue would stabilise debt at just higher than 40 percent of GDP.
A new local government equitable share formula was proposed, providing a subsidy for free basic services designed to reach 59 percent of households.
“In this budget we continue to invest in education, health, housing, public transport, and social development components of the social wage, which add up to about 60 percent of public expenditure,” he said.
Social services gets R682.3 billion: education and related functions R232.5 billion (basic education R164 billion); social protection R134.9 billion; health R133.6 billion; and, housing and community services R132.1 billion.
Public order and safety takes up R108.9 billion: police services R73.4 billion; correctional services R18.7 billion; and, justice R16.8 billion.
Economic affairs gets R136.6 billion: transport R74.6 billion; and, agriculture, forestry and fisheries together with rural development and land reform, R23.4 billion.
Defence is allocated R44.8 billion, and science and technology R16.3 billion.
Debt service costs run to R99.7 billion, and R4 billion is set aside as a contingency reserve. - Sapa