Finance Minister Tito Mboweni tabled the national budget in Parliament on Wednesday, 24 February, outlining South Africa’s spending, tax and borrowing plans for the next three years.
There was good news for taxpayers after the National Treasury decided to reverse an earlier decision to increase personal income taxes. The tax revenue shortfall has narrowed to R213bn after the SA Revenue Service (Sars) was able to collect a further R99bn. The government is also providing a further R2.2bn in tax relief to households through raising personal income tax brackets and rebates by 5%.
Also, the corporate tax rate will be reduced from 28% to 27%. This will be for the years of assessment commencing on or after April 1 2022.
The budget deficit has been revised to 14 per cent of GDP in 2020/21 in response to the spending and economic pressures of the COVID-19 pandemic.
Other key budget highlights are covered below. Information was sourced from National Treasury.
Real GDP is expected to grow at 3.3 per cent in 2021 and 2.2 per cent in 2022. Government will take steps to promote faster growth by stabilising electricity supply, supporting industries with high employment.
Gross debt has increased from 65.6 per cent to 80.3 per cent of GDP for the year 2020/21.
The proposed fiscal framework will stabilise debt at 88.9 per cent of GDP in 2025/26. Government will roll out a free mass COVID-19 vaccination campaign for which R9 billion has been allocated in the medium term.
Over the medium term, debt-service costs are expected to average 20.9 per cent of gross tax revenue.
To support economic recovery, government will not raise any additional tax revenue in this budget.
The personal income tax brackets and rebates will increase above the inflation rate of 4 per cent.
Government will increase excise duties on alcohol and tobacco by 8 per cent for 2021/22.
Inflation-related increases of 15c/litre and 11c/litre will be implemented for the general fuel levy and the RAF levy, respectively, with effect from 7 April 2021. The UIF contribution ceiling will be set at R17 711.58 per month from 1 March 2021.
All in all the Treasury has committed to holding the line on its fiscal consolidation plans without increasing taxes.
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