Independent Online

Tuesday, May 17, 2022

Like us on FacebookFollow us on TwitterView weather by locationView market indicators

Budget 2022 – No shocks for employers and some pleasant surprises

Thanks to a windfall from booming commodities prices, South African finance minister Enoch Godongwana protected personal and corporate taxpayers from any significant tax increases in his budget for 2022/23. File Image: Via Nappy.co

Thanks to a windfall from booming commodities prices, South African finance minister Enoch Godongwana protected personal and corporate taxpayers from any significant tax increases in his budget for 2022/23. File Image: Via Nappy.co

Published Feb 24, 2022

Share

By Yolandi Esterhuizen

South African taxpayers owe a debt of gratitude to the mining industry. Thanks to a windfall from booming commodities prices, South African finance minister Enoch Godongwana protected personal and corporate taxpayers from any significant tax increases in his budget for 2022/23. Instead, he found R5.2 billion in tax relief to provide respite from soaring petrol prices and boost incentives for youth employment.

Story continues below Advertisment

While the country’s fiscus remains under pressure, an increase in tax collections gave us all a little more room to breathe. Minister Godongwana signalled that he doesn’t believe raising taxes boosts government revenues because taxpayers change their behaviour in response. Instead, his efforts appear to focus on broadening the tax base and addressing non-compliance.

Aligned to initial predictions, here are some elements of the Budget Speech for 2022/23 that caught my eye:

Personal tax

Story continues below Advertisment

Minister Godongwana rightly said that now is not the time to put the country’s economic recovery at risk. Therefore, the government will not raise any additional tax revenue through personal income tax rates. Personal income tax brackets and rebates will increase by 4.5%, aligned with inflation. The annual tax-free threshold for a person under 65 will increase from R87 300 to R91 250. This is good news for cash-strapped households and businesses that depend on consumer spending.

Corporate tax rate

Minister Godongwana confirmed that the corporate income tax rate will be reduced from 28% to 27% for companies with the year of assessment ending on or after 31 March 2023, as announced in the 2021 Budget Speech. The corporate income tax rate cut will be offset by amendments limiting assessed losses and interest deductions. I was concerned that the reduction in the corporate tax rate would be delayed or even cancelled after former finance minister, Tito Mboweni, was replaced.

Story continues below Advertisment

Home office tax deductions and travel

National Treasury announced plans to review the current travel and home office allowances, starting with consultations during 2021/2022. The remote working trend is likely to stay, yet many employees cannot qualify for tax deductions against their home working expenses. It is heartening to see that a discussion document will be issued this year about the personal income tax regime for remote workers and is something to keep a close eye on this fiscus.

Employment Tax Incentive (ETI)

Story continues below Advertisment

A 50% increase in the ETI to a maximum of R1500 was one of the pleasant surprises in the Budget Speech. We welcome this move to encourage companies to hire more young people as part of the response to the youth unemployment crisis in our country. It will also help small businesses to improve cash flow in these challenging times.

Fuel levy

For the first time in more than 30 years, fuel and Road Accident Fund levies will not be increased. With fuel prices climbing in an environment of global inflation, this will be welcome news for beleaguered consumers and businesses.

Two pot pension system

Government reiterated its plans to restructure the retirement system to allow greater preservation and partial access to funds through a “two-pot” system. In the future, members’ retirement savings will be split into two pots: An accessible pot into which one-third of their contributions will be invested, and an inaccessible retirement pot, in which the other two-thirds will be invested. Public consultations are underway, but it seems unlikely these will bear fruit before next year’s budget speech.

New taxes

Among the few new taxes, the Government wants to introduce are a tax on vaping products from January 2023 and a tax on beer powder.

Focus on wealthy income tax payers

Government has proposed that provisional taxpayers with assets over R50 million be required to declare specified assets and liabilities at market values in their 2023 tax returns. This is a clear sign of the increased focus on enforcement as a means to bolster tax revenues in the years to come and could even pave the way to new wealth taxes.

Yolandi Esterhuizen is a Registered Tax Practitioner & Director of Product Compliance at Sage Africa & Middle East

BUSINESS REPORT

Related Topics:

Enoch Godongwana

Share