Finance Minister Enoch Godongwana has announced that a revenue windfall thanks mainly to a commodities boom has allowed for tax relief for individuals and a 1% point drop in the corporate rate to 27%.
The fuel and Road Accident Fund levies have also not been increased – the first time that has happened since 1990, comments TreasuryONE.
The rand which fell below the R15.00-level against the US dollar to hit an intraday best level of R14.97/$ and trading at R15.02 just before the start of the Budget speech was last trading at R15.05 against the US dollar.
Godongwana said households and businesses are still under financial pressure and are coping with higher obligations, the effects of Covid-19 and increased fuel prices.
“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,” he said as he announced R5.2bn in tax relief to help support the economic recovery, provide some respite from fuel tax increases, and boost incentives for youth employment.
On keeping the general fuel levy on petrol and diesel for 2022/23 steady, the minister said record-high fuel prices have put pressure on the cost of transport, food and other goods and services. “To provide some relief to households, no increases will be made. This will provide tax relief of R3.5bn to South Africans.”
On a macroeconomic level the minister highlighted that South Africa sees a budget deficit at 5.7% for 2022, revised lower from 7.8% in the medium-term budget speech. Also revised down is the debt-to-GDP ratio to peak at 75.1% in 2025, down from 78.1%.
“While the debt number looks better, it is still of concern that the debt servicing cost will rise 80% in the five years leading up to 2025,” says TreasuryONE.
Highlighting the wage bill as a risk to the fiscal framework, Godongwana announced that it has been increased by a modest average of 1.8% over the next three years.
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