February is finally behind us… We have survived a month that can be marked by the dread of taxes, questions about its application and then also the Budget Speech for the coming year.
Minister Enoch Godongwana delivered his first Budget Speech and contrary to the general expectation that taxes in South Africa will have to be increased to finance the current debt burden and spending, the Minister surprised with very few increases. In fact, individuals will pay less tax next year (if the effect of inflation is excluded) and the tax rate for companies (whose year-end starts after 1 April 2022) has been reduced to 27%.
The Minister’s point of departure was clear that taxation should not be increased as he wants to keep more money in the hands of the South African taxpayer in order to create conditions that will stimulate investment and ensure economic growth.
In his speech, the Minister further briefly touched on a number of pressing issues but failed to elaborate on the plans to address them. According to economists, no concrete plans have been communicated to deal with the current debt burden (approximately R4,35 billion) in South Africa, to ensure and increase the projected GDP growth of 1.8% over the next three years, reduce social grants (46% of the population depends on this), and reduce the country’s expenditure (budgeted for R2,15 billion) in order to be covered by income (budgeted for R1,85 billion) and not by government debt.
With the above as a background, it is therefore clear that economic growth in South Africa is becoming more essential. However, it is gratifying for us that our client base is making a positive contribution to South Africa and is constantly doing so through further investment and job creation. Let us hope and make plans together to ensure that the Minister’s intention that tax savings will stimulate economic growth is implemented.
You are welcome to contact us if you would like to discuss the impact of the current budget on your situation. You can also download ASL’s electronic tax guide from our website. Click here to download our 2022/2023 tax guide.