The Bounce Back Support Scheme, a loan guarantee mechanism of R15 billion which was first highlighted in the February 2022 budget speech, has come into effect in April 2022. The scheme aims to facilitate job creation and economic growth in the wake of shocks such as the Covid-19 lockdowns, the July 2021 civil unrest in Kwa-Zulu Natal and Gauteng, and the ongoing flood disaster.
The Minister of finance Enoch Godongwana tabled his Budget review on the 23rd February 2022. The following were the key tax issues arising.
South Africa’s Sustainable Finance Initiative, chaired by National Treasury, has launched the country’s first national Green Finance Taxonomy in April 2022. This responds to recommendations from National Treasury’s 2021 Technical Paper: Financing a Sustainable Economy, which calls for the development or adoption of “a taxonomy for green, social and sustainable finance initiatives, consistent with international developments, to build credibility, foster investment, and enable effective monitoring and disclosure of performance.”
Figure 1: PPI headline index numbers and year-on-year rate of change
Nicholas Crisp, deputy director-general for the NHI, recently briefed Parliament on the NHI Bill following extensive public hearings. He tabled that government proposed to levy surcharges on personal income tax, payroll tax, and reallocating funding for medical scheme tax credits. These are some of the "chief sources of income" for the government's proposed National Health Insurance (NHI).
On the 24th March Lesetja Kganyago, Governor of the South African Reserve Bank, announced an increase in the repurchase rate by 25 basis points to 4.25% per year, with effect from the 25th of March 2022.
The 2020 Budget announced government’s intention to restructure the corporate income tax system by reducing avoidance opportunities and expanding the tax base, while lowering the headline tax rate. South Africa’s interest limitation rules also need to be better aligned with OECD/G20 recommendations on base erosion and profit shifting.
Medium‐term fiscal policy is focused on reducing the budget deficit and stabilising the debt‐to‐GDP ratio. To support this consolidation, government will use a portion of higher‐than‐anticipated tax revenue to narrow the deficit while increasing non‐interest expenditure to support economic growth, job creation and social protection.
Main budget non‐interest spending increases by a net R282.3 billion over the medium‐term expenditure framework (MTEF) period compared to the 2021 Budget. This increase is supported by higher‐than‐anticipated revenue collections and does not jeopardise the path to deficit reduction. Total consolidated government spending will amount to R6.62 trillion over the next three years. Additional allocations of R110.8 billion in 2022/23, R60 billion in 2023/24 and R56.6 billion in 2024/25 are made for several priorities that could not be funded through reprioritisation. These include the special COVID‐19 social relief of distress grant, the continuation of bursaries for students benefiting from the National Student Financial Aid Scheme, and the presidential employment initiative. Debt‐service costs will average R333.4 billion per year.
Following a weaker‐than‐expected third quarter, economic growth for 2021 has been revised down to 4.8 per cent, compared with 5.1 per cent estimated at the time of the 2021 Medium Term Budget Policy Statement (MTBPS). The medium‐term growth outlook has improved moderately. Treasury projects real economic growth of 2.1 per cent in 2022, the year in which the economy is expected to return to pre‐pandemic production levels. GDP growth is expected to average 1.8 per cent over the next three years.
Newly appointed Minister of Finance, Mr Enoch Godongwana will table the MTBPS on the 4th of November at 14h00. The MTBPS sets out the policy framework for the Budget that is presented every February, updates National Treasury's economic forecasts, adjusts the budgets of government departments and makes emergency changes to spending.
Penalties for late filing of Pay As You Earn (PAYE) returns was introduced this year. SARS is in the process of enhancing their Dispute Resolution process to allow for this penalty to be disputed separately from a PAYE late payment penalty.
A crypto asset is a digital representation of value that is not issued by a central bank, but is traded, transferred and stored electronically by natural and legal persons for the purpose of payment, investment and other forms of utility, and applies cryptography techniques in the underlying technology.
Despite the recent relaxation of the national lockdown, various businesses and employees are still negatively impacted by the COVID-19 pandemic. These negative impacts are further exacerbated by the impacts of the recent unrest in the country that destroyed businesses and infrastructure. The Government, therefore, wishes to provide additional assistance to those who continue to be adversely affected by COVID-19, as well as assisting in the process of reconstructing businesses. Moreover, this support measure is aimed at supporting employment in the most vulnerable sections of the labour market.
President Cyril Ramaphosa announced several emergency tax relief measures in response to the continuing Covid-19 pandemic and recent unrest that are aimed at helping affected and tax compliant businesses to recover and ensure livelihoods for employees.
Information and Communication Technologies (ICTs), have shown to be major contributors to the effectiveness of many different businesses throughout the world and are constantly changing the way people and industries operate. ICTs can be defined as an array of technologies that are designed to collect, store, process and communicate information both internally as well as externally, of an organization. This makes ICTs quite a broad category of technologies but some of the most common examples are cloud computing, mobile apps, networked environments and even the Internet!
Filing season starts on the 1st of July this year. The good news is that a significant number of individual taxpayers will be auto-assessed again this year, and this process will start in July. SARS will send you an SMS if you are selected to be auto-assessed. SARS will auto-assess based on the data received from employers, financial institutions, medical schemes, retirement annuity fund administrators and other 3rd party data providers. If you accept your auto-assessment, any under or overpayment of tax will be processed as normal. If you want to edit your return, you can file your return on eFiling or the SARS MobiApp or alternatively contact us for professional assistance in this regards.
Filing Season 2021 for employers, during which they must file the annual Employer Reconciliation Declaration (EMP501), opens on 1 April 2021 and closes on 31 May 2021. The EMP501 must reflect accurate payroll information about their employees, employees’ tax (PAYE) payments made and Tax Certificates (IRP5/IT3) (a)s generated, covering the full tax year from 1 March 2020 to 28 February 2021.
The COVID-19 pandemic has had a severe impact on tax revenue collection. Given large predicted shortfalls in revenue for 2020/21 and over the next three years, the 2020 Medium Term Budget Policy Statement (MTBPS) confirmed that tax increases totalling R40 billion would be required over the next four years to help stabilise public debt and return the public finances to a sustainable position. These increases were first announced in the June 2020 special adjustments budget.
Government is reducing the number of tax incentives, expenditure deductions and assessed loss offsets, with the aim of lowering the corporate income tax rate over the medium term. These changes are expected to enhance efficiency, transparency and fairness in the business tax system, while facilitating economic growth through improved investment and competitiveness.
Personal income tax accounts for about 40 per cent of total tax revenue. In response to extreme levels of inequality, South Africa’s rate structure is highly progressive and covers tax residents’ worldwide income. South Africa has the highest personal income tax share among upper middle-income countries, alongside one of the highest top personal income tax rates.
Tito Mboweni’s big day looms this month, with little progress on the medium-term budget policy speech. The biggest issue relates to the freeze on government wages to which there has been no resolution yet. Let’s hope that we get finality in the upcoming budget.
(Extract from the Medium Term Budget Policy Statement)
In terms of Disaster Management Act relief measures, three payment dates still apply: