Amid concerns was whether a tax increase would be imposed for the 2023 tax year amid rising daily living expenses. However, Godongwana brought news that was well received by clarifying that a tax increase would not be on the cards:
“Now is not the time to increase taxes and put the recovery at risk.
Accordingly, we have decided to keep money in the pockets of South Africans.”
A summary of the biggest changes indicated by the budget speech can be found below.
According to Godongwana, revenue collections were significantly higher than expected for the 2022 tax year, arising mainly from the mining sector due to higher commodity prices.
GDP growth is expected at 2.1% for the current year, whilst 1.8% over the next three years, the global economy is expected to grow by 4.4% this year.
Personal income tax
The personal income tax brackets and rebates will be adjusted by 4.5%, in line with inflation, to assist with the increase in household living expenses. This change is mainly targeted towards the middle-income group. For example, if you were earning R35,000 a month at under 65 years old without any contributions or allowances, your monthly take-home pay for the 2022 tax year would have been R28,131. Under the new brackets for the 2023 tax year, your monthly take-home pay has increased to R28,319.
The income tax rate for trusts will remain unchanged at 45%.
A summary of the tax brackets and rebates for the 2023 tax year can be found below:
Corporate income tax
As announced in the 2021 Budget, the corporate income tax rate will be reduced from 28% to 27% for companies with years of assessment ending on or after 31 March 2023. This decrease comes when many businesses are still dealing with the ripple effects caused by Covid restrictions and places South Africa more in line with the Organisation for Economic Cooperation and Developments corporate tax rate average of 23%.
Employment tax incentive
The employee incentive tax will be increased by 50% to R1,500 per month to reduce unemployment levels among the youth, which is currently at a rate of 56%. Godongwana urged small and medium businesses to take up this incentive as their employment would add further support to the existing tax base.
The Value Added Tax (VAT) rate will remain at 15%. However, the Government intends to review the current regulations prescribing electronic services to account for further developments in this area.
The fuel price has been steadily increasing over the past year, with another steep increase expected in March 2022. Godongwana confirmed that there will be no increase on the petrol and diesel general fuel levy for 2022/2023 nor the Road Accident Fund levy. Furthermore, a review of aspects impacting the fuel price is being undertaken with Resources and Energy Minister Gwede Mantashe.
A bottle of spirits will now be R4.83 more expensive, whilst a pack of cigarettes will be an additional R1.03 as excise duties on alcohol and tobacco will increase between 4.5 and 6.5%. The government also proposes to introduce a new tax on vaping products of at least R2.90 per millilitre from 1 January 2023.
Sugar consumers will also experience more expensive products as the health promotion levy will be increased to 2.31 cents per gram of sugar.
Godongwana urged all companies that have not already done so to develop plans to progressively reduce their greenhouse emissions over the next ten years; otherwise, they will face steep carbon taxes, with a progressive increase expected every year.
The carbon tax rate will increase from R134 to R144, effective from 1 January 2022. As required by legislation, the carbon fuel levy will increase by 1c to 9c per litre for petrol, and 10c per litre for diesel, from 6 April 2022.
In an effort to tackle unexplained wealth linked to fraud and non-compliance, all South African provisional taxpayers who own assets of more than R50 million will be required to declare their assets and liabilities in their tax returns for the 2023 tax year.
The government expects to re-negotiate existing tax treaties with various countries to retain their taxing rights on the payments of local retirement interest to persons who are no longer South African tax residents and living abroad.
In an attempt to counter tax avoidance, the Government has proposed that the offsetting of the balance of assessed losses brought forward will be limited to 80% of taxable income. This means that companies with an assessed loss balance that matches or exceeds their current‐year taxable income will need to pay tax on 20% of their taxable income.
While the tax breaks are welcomed among individuals and corporations, other industries will be experiencing an increase in taxation, particularly those in the natural resources, sugar and tobacco industries. Consumers of tobacco, sugar and alcohol can also expect a knock-on effect in product pricing. The government has also proposed certain amendments to existing legislation and treaties, which will need to be closely monitored in the near future should they come into effect.
Godongwana closed with a notice of caution among these reliefs, emphasising that these were given on the basis that if there are permanent expenditure increases in the coming years, Government would have no choice but to revisit this to ensure the fiscal deficit does not worsen.