THE LACK OF RELIABLE ELECTRICITY SUPPLY IS THE BIGGEST ECONOMIC CONSTRAINT
Against the backdrop of rising inflation and rolling blackouts that are continuing to plague the South African economy, Finance Minister Enoch Godongwana delivered the National Budget address on Wednesday, 22 February 2023.
During his address, he revealed the government’s preliminary plan to alleviate Eskom’s debt, which amounts to R254 billion, with one solution being the introduction of tax benefits for rooftop solar PV systems.
The Budget did not comprise significant tax hikes in most areas, mainly as a result of higher revenue projections.
Individuals will be relieved that no tax hikes were introduced for individual income taxes. Instead, the government stated that it would provide “tax relief” by modifying personal income tax brackets and rebates to accommodate the impact of inflation.
The minister also acknowledged the possibility of South Africa being greylisted by the Financial Action Task Force later in the week, which would make offshore investment more difficult.
Although the 2023 Budget relayed good and bad news, the minister ensured South Africans that the “Government remains focused on ensuring that the tax system is fair, efficient, and equitable.”
Overall:
- The consolidated budget deficit will decline from a projected 4.2% of GDP in 2022/23, reaching 3.2% of GDP in 2025/26.
- The Government expects to collect tax revenue of R1 788 billion, of which 35.8% comes from personal income tax in 2023/24.
- Real GDP is expected to average 1.4% from 2023 to 2025, compared to 1.6% estimated in October.
- Total consolidated government spending will amount to R7.08 trillion over the next three years,
of which 51% or R3.6 trillion is allocated for the social wage. - Debt service costs for the present financial year were budgeted for R301.8 billion last year. This year around, the budgeted amount is R340.5 billion, mostly due to increased repayment of borrowings. Lately, the Government is taking its debt-consolidation efforts seriously.
- Adjustments to both transfer duty and personal income tax tables will cater for “bracket creep”.
- R4 billion in relief is provided for individuals that install solar panels, and R5 billion to companies through an expansion of the renewable energy tax incentive.
- Eskom debt relief proposal of R254 billion.
For consumers:
- “Bracket creep” is addressed through inflation-related adjustments to the personal income tax tables, the retirement tax tables, and transfer duties.
- No wealth tax, none predicted.
- As was the case last year, no change to the general fuel levy or the Road Accident Fund levy.
- The exemption of foreign remuneration earned by South African tax residents remains unchanged.
- Increases of 4.9% in excise duties on alcohol and tobacco.
From 1 March, for a year, a tax rebate is made available against natural persons’ tax bill for renewable energy. The rebate is equal to a quarter of the cost of solar panels installed, subject to a maximum rebate amount of R15 000.
