Independent Online

Tuesday, August 9, 2022

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

No new tax measures for distressed companies, says Mboweni

Minister of Finance Tito Mboweni. Picture: Phando Jikelo/African News Agency (ANA) Archives

Minister of Finance Tito Mboweni. Picture: Phando Jikelo/African News Agency (ANA) Archives

Published Aug 4, 2021


Cape Town - Finance Minister Tito Mboweni has ruled out any possibility of new tax measures for companies that face financial distress due to Covid-19 saying they can utilise the existing tax administrative measures to apply for hardship relief.

Mboweni said this when he was responding in writing to parliamentary questions from IFP MP Mzamo Buthelezi when he asked whether he intended to revise the corporate taxation regime to boost post Covid-19 recovery.

Story continues below Advertisement

Buthelezi also inquired about plans to incentivise investment in local production through tax incentives.

In his written reply, Mboweni said he generally only makes tax announcements when he delivers his Budget speech.

He also said given the exceptional circumstances after the first Covid-19 lockdown, he made some tax announcements on March 29 and April 23, 2020 to provide tax relief to businesses and individuals during the 2021/21 financial year.

“Two of these measures applied to corporations, namely delaying the base-broadening measures I had announced in the previous Budget and deferrals for provisional tax payments. These measures have now run their course.”

Mboweni also said the corporate tax regime already contained automatic stabilisers as a tax on profits, and as companies’ profitability recovered so would revenue from corporate income tax.

“Companies that face financial distress can utilise the existing tax administrative measures to apply for hardship relief. To aid the medium-term recovery, I announced in the 2021 Budget speech the overall intention to restructure the corporate income tax system in a revenue neutral manner, through a combination of a tax rate reduction and base-broadening measures.

Story continues below Advertisement

“These measures are expected to enhance efficiency, transparency and fairness in the corporate tax system. The design of the corporate income tax system can influence taxpayer behaviour, which impacts the economy.”

The minister said a corporate income tax regime characterised by a broad base (fewer tax incentives and exemptions) and a lower rate was simpler with less loopholes and required less onerous anti-avoidance legislation.

Mboweni also said introducing additional further tax incentives would also work against the country’s objective to broaden tax base and lower the tax rate for all businesses, and to do so in a revenue neutral manner.

Story continues below Advertisement

He said tax incentives provided certain taxpayers/industries with preferential treatment compared to what was generally available to all, creating opportunities for vested interests and lobby groups.

“The National Treasury has already commenced a process to review existing corporate tax incentives with a view to repeal those that are redundant and include sunset dates where there are none. Studies conducted by international organisations, such as the International Monetary Fund (IMF), the Organization for Economic Co-operation and Development (OECD) and the World Bank confirm that investors also value other factors above tax incentives when making investment decisions.

“These include political and policy certainty, infrastructure, access to markets, access to skilled labour, etcetera. Reducing the corporate income tax rate and broadening the base is a better means of benefiting all businesses. In turn, employees and consumers can also benefit from higher wages and lower prices,” Mboweni added.

Story continues below Advertisement

[email protected]

Political Bureau