South Africans should not expect a hike in VAT
AMID the budget deficit not moving in the right direction, a tax specialist says South Africans can expect Finance Minister Enoch Godongwana to raise the price of beer and cigarettes, but it being an election year, no increases in personal income tax or value added tax (VAT) should be expected.
Godongwana is expected to table his annual budget speech tomorrow.
Professor Keith Engel, the chief executive of the professionals body the South African Institute of Taxation, has weighed in on the possibility of tax increases ahead of the 2024/25 Budget speech.
“My feeling is that in an election year there is a slim to no chance of a tax increase, especially no tax increase around VAT,” Engel said.
According to Engel, there could be increases in other taxes such as sin tax, which refers to increases related to alcohol and tobacco sales.
Engel does not expect a rate increase in personal income tax, however, the government will not fully adjust the rate for inflation if it needs more money.
Engel said the only new worry about the Budget speech in comparison to the usual worries like taxes, is the National Health Insurance (NHI).
Given that the NHI is a subject of massive litigation and delay, Engel does not expect any big announcements. However, if the NHI is given a huge push then the government will pull back on medical aid credits or get rid of them.
While NHI has not been rolled out, once the government starts to fund it, the first step would be to eliminate medical credits.
Engel said the finance minister can only do so much to stimulate growth, so lowering corporate taxes will certainly not be on the cards.
Incentives for renewable energy generally will have a muted effect and are usually paltry so they don’t make a difference.
The real issue for growth of the South African economy lies outside of the finance minister, Engel said. South Africa is not privatising fast enough when it comes to state-owned-enterprises such as Transnet and Eskom.
He said not enough money was being put towards infrastructure and the government was not paying attention to de-regulation.
“The government is committed to hard regulations which is slowing business down,” Engel said.
Engel said that the finance minister cannot save the day for growth, instead it is up to the rest of the government and President Cyril Ramaphosa to sort out these issues.