The upcoming National Budget Speech for 2019/20 could be a seminal moment for South Africa’s Treasury. The possibility exists that the country may see the impactful tax changes that have been made over the past two years, begin to bear fruit.
This is according to Mike Teuchert, National Head of Taxation at Mazars, who notes that this is the first year that Minister Tito Mboweni will have a real influence on any of Treasury’s policies, having only been appointed two weeks prior to last year’s Mid-Term Budget Policy Statement.
“With 2019 being an election year, we predict that the 2019 Budget Speech will probably not see major changes to existing taxes. However, we should definitely look for a number of indicators that will give South Africans a much clearer picture on what to expect in the year ahead.”
Looking at the major tax classes, Teuchert comments that corporate and personal income taxes have been stretched to their limit, and the public is unlikely to react favourably to any further increases in the value added tax (VAT) rate.
“Treasury will be under pressure to avoid any moves that could shake voter confidence, so there will likely be less said about increasing taxes, and perhaps more emphasis on increasing social grants. On the other hand, Treasury still has challenges to solve, so it will be interesting to see how it navigates around issues like the revenue collection shortfall (estimated in October of 2018 to be around R27.4 billion), and the current budget deficit (which is expected to have expanded to 4.8% of the country’s gross domestic product).”