Tough budget in 2024?

Tax hikes and decrease in govt spending are likely – tax practitioner. BALANCING ACT HAS TO BE ‘PARTICULARLY DELICATE’

When Finance Minister Enoch Godongwana delivers his budget speech on 21 February, will he make the tough choices to increase taxes and announce belt-tightening measures, or will it be an election-friendly budget designed to keep voters choosing the ruling party?

In his medium-term budget policy statement (MTBPS), Godongwana revealed a significant shortfall in government revenue, projecting a loss of nearly R57 billion for the current tax year and R54 billion for 2024-5.

He warned South Africans to brace for tax hikes and a decrease in government spending in the 2024-5 tax year, Yolandi Esterhuizen, a registered tax practitioner and director of global compliance: product management at Sage AME, said.

Bazil Marema, senior compliance specialist at Sage AME, said National Treasury faced the formidable challenge of raising tax revenue while keeping the electorate satisfied in an election year. “The budget speech in February is usually a balancing act, but this year, in particular, will require an especially delicate touch.”

Esterhuizen and Marema and their colleague, Motumi Tsoeute, senior compliance specialist, said they would keep an eye out for these 10 key aspects:

No PAYE increases

South Africans are grappling with inflation, increasing energy and food costs as well as higher interest rates. Although government may be reluctant to directly increase income tax, SA can anticipate a minor tax bracket creep to cater for inflation, they said.

Delays for National Health Insurance (NHI)

SA can expect a potential delay in the NHI implementation, coupled with uncertainty about its funding.”

Fuel levy increases

For the past two years, government maintained the fuel levy at a consistent level, but this year, they said, SA would likely see an increase in line with inflation.

Diesel refunds for smaller generators

In the 2023-24 budget, government extended the Road Accident Fund levy refund for diesel used in manufacturing for food producers, effective from 1 April, 2023, for two years to mitigate the impact of power outages on food prices. Some experts suggest expanding this diesel refund to businesses using generators, as this will benefit small and medium businesses. Whether the government will consider such a measure, given the need to increase revenues, remains uncertain.

Solar energy tax credits

The 2023-24 tax year provided tax incentives for households adopting solar power. Whether government will extend this incentive remains to be seen.

Electricity Minister Kgosientsho Ramokgopa supports the tax incentive continuation and proposes expanding it to include inverters and batteries. The budget speech will reveal whether his suggestion has been embraced.

Catering for remote workers

National Treasury is actively updating tax laws and might adjust the tax treatment of home office and travel expenses in the upcoming tax years to accommodate a digital and global workforce.

We can expect delay in NHI implementation

Bringing digital nomads into the tax net

The 2023 Tax Administration Law Amendment Bill proposes that all employers, including those abroad who conduct business through a permanent establishment in SA, withhold PAYE for South African employees and remit it to Sars monthly.

Focus on tax collection from South Africans working abroad

The 2023 Taxation Laws Amendment Bill proposes that tax deductions for employer contributions towards retirement funds be disallowed if the employer contribution is not included in the taxable income of the employee.

VAT likely to remain the same

Due to the disproportionate impact of a VAT increase on poorer communities, it is unlikely to change. – inao@citizen.co.za