(Photo: GCIS)
The budget speech that Enoch Godongwana, the finance minister, tabled in parliament on Wednesday, elicited mixed reactions.
Although welcome adjustments have been made, experts believe that the South African taxpayer is still getting the short end of the stick after years of economic pressure.
Theuns du Buisson, economic researcher of the Solidarity Research Institute (SNI), welcomes the adjustment of tax brackets in line with inflation. However, he says it is actually too little to repair the damage of the past few years.
“This is of course hopelessly too little and should be adjusted with significantly more than inflation, as it has not been adjusted at all for two years. So a large part of salary earners’ salary increase for two years ended up with the South African Revenue Service (SARS) rather than in their own pockets.
“This is changing for this year, but still salary earners are still quite a few years behind when it comes to tax relief,” says Du Buisson.
However, there are bright spots in the budget that cater to those trying to provide for their future.
“It is quite encouraging to see how the allowance for tax-free savings accounts is raised from R36 000 to R46 000 per year, and also that the maximum you can draw from your income increase for retirement or annuity planning is increased from R350 000 to R430 000.
“We hope this encourages more people to save for retirement.”
Du Buisson says the budget also contains significant relief for entrepreneurs, especially those who have built up their own businesses over the years.
“Several concessions have been made for small businesses, which are welcomed. This applies in particular to the increase in the cut-off point from which capital gains tax is paid.
“It is essential to make it worthwhile for people to be able to sell their small businesses without most of the profit they make on the sale going to the state.”
In an important turn for the health sector, it appears that the state’s focus has shifted from the controversial National Health Insurance Scheme (NHI) to the immediate needs of the public health system.
“No extra allocation was made for the NGV this year either. If that had happened, Solidarity would undoubtedly have taken the treasury to court. That money was instead budgeted to appoint more doctors and to fix the public system, which are important steps.”
Du Buisson further emphasized that, although medical aid tax credits are adjusted for inflation, they do not reflect the reality of medical costs. He says the consumer is still disadvantaged because medical inflation is much higher than the general rate. In this respect too, the taxpayer remains the big loser as the adjustments do not keep up with the rapidly rising costs of health care.
Du Buisson also warns that the stricter application of exchange controls “stands completely in the way of foreign investment in South Africa”.
“Instead of relaxing or even scrapping currency controls, they are now applied more strictly and will even apply to cryptocurrencies. This is a very bad thing that will discourage further investments.”
The stabilization of debt levels and the focus on critical issues such as power supply and border security are reasons for hope.
“We welcome the intention to expand the free electricity market and that border security will now be prioritized.
“We appeal to citizens to keep an eye on whether borders are indeed secured because the money has now been made available for it. It will depend to a large extent on the public to make sure and exert pressure that this is indeed done.”
Du Buisson believes that Godongwana’s predictions have become more credible in recent years.
“We hope that this budget speech, during which it was emphasized how debt levels are stabilizing and will improve over the next three years, can be believed this time.”