Treasury sets out plans to render on to Caesar what belongs to Caesar.
Revenue collection remains a bugbear for government due to weak economic growth and tax administration concerns, which were self-inflicted, South Africa’s Finance Minister Tito Mboweni told journalist in a Budget press conference.
The revised tax revenue estimate for 2018/19 is R15.4 billion lower than anticipated by the 2018 Medium Term Budget Policy Statement (MTBPS) estimate. Thus the projected revenue shortfall of R27.4 billion is now R42.8 billion compared with the 2018 Budget estimate.
This sombre news was revealed by Mboweni in his maiden Budget on Wednesday. To address this shortfall, tax changes designed to raise R15 billion in additional tax revenue in 2019/20 have been introduced.
These among others include:
- Increasing the tax-free threshold for personal income taxes from R78 150 to R79 000. No changes will be made to personal income tax brackets.
- Increasing the fuel levy by 29c/litre, consisting of a 15c/litre increase in the general fuel levy, a 5c/litre increase in the Road Accident Fund (RAF) levy and the introduction of a carbon tax on fuel of 9c/litre.
- Increasing excise duties on alcohol and tobacco products by between 7.4 per cent and 9 per cent. The targeted excise tax burden for wine, beer and spirits is 11 per cent, 23 per cent and 36 per cent respectively.
- No change in the monthly medical tax credit for medical scheme contributions.
- Increase in health promotion levy from 1 April from 2.1c to 2.21c per gram in excess of 4 grams of sugar per 100ml.
- Limiting the RAF levy diesel refund for primary production industries to ensure that diesel users in these sectors equitably contribute towards their RAF indemnity.
- The implementation of carbon tax on 1 June 2019.
- Government proposes to align the tax treatment on ad valorem excise duty on motor vehicles Because of the way ad valorem excise duty is calculated, vehicles produced locally are taxed at a higher rate than imported vehicles.
- Government intends to publish draft legislation for public comment during 2019 on a gambling tax.
- Urban development zone tax incentive to be reviewed.
- South Africa reviewing its oil and gas tax regimes in 2019.
- Taxing electronic cigarettes and tobacco heating products.
- Definition of fuel levy goods for tax purposes to be reviewed may include mineral ethanol, illuminating paraffin, aviation kerosene, liquefied petroleum gas, compressed natural gas – as well as biofuels such as bioethanol and biogas
- Tax on “single-use” plastics including straws, caps, beverage cups and lids, and containers to curb their use and encourage recycling will be considered.
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Although few, government has also introduced a number of tax incentives. These include:
- From 1 March 2019, employers participating in the Employment tax incentive will be able to claim the maximum value of R1 000 per month for employees earning up to R4 500 monthly, up from R4 000 previously. The incentive value will taper to zero at the maximum monthly income of R6 500.
- From 1 April 2019, the list of items for zero-rating for VAT will include white bread flour, cake flour and sanitary pads.
- Energy-efficiency savings tax incentive to be extended to 31 December 2022. During 2019, government will review the design and administration of the incentive to improve its ease of use, effectiveness and economic impact.
Treasury has also recognised that to render on to Caesar, what belongs to Caesar it needs to restore the efficiency of SARS. To do this it plans to:
- Appoint a new SARS Commissioner in the coming weeks.
- It has established a new Illicit Economy Unit to fight trade in the illicit economy.
- Officially launch the Large business Unit in early April 2019.
- Strengthen SARS IT team & systems.
- Establish information sharing agreements with allies to help fight cross-border tax evasion schemes.
- Set up an inspector-general for tax administration.
- Through internal processes, SARS will implement recommendations concerning inappropriate actions, fruitless and wasteful expenditure, unfair labour practices and maladministration.
- SARS will review contracts that breached public procurement regulations and will act to recover funds spent.
- SARS is normalising refund payments.