Finance Minister Tito Mboweni delivered his budget speech on 26 February 2020 painting a rather bleak view of the current and future economic climate in South Africa.
With inflation and our budget deficit said to increase at a remarkable rate in comparison to economic growth, what are the positives to be taken away and how are we moving towards resolving the issues?
According to Mboweni, the aim is to cut government expenditure as opposed to boosting revenue and in an aim of what appears to be an attempt to “salve the burn” of the tax-payer, he announced that personal income tax bracket and rebates will increase by 5.2% for 2020 and 2021.
On a global business level, it was admitted that we have enjoyed fewer international business interactions than in the past. Be that as it may, the Minister advised that a reduction on Corporate Tax will go a long way in sending the message that South Africa is “open for business”.
Addressing the issue of Eskom’s debt, social grants and sin tax, Mboweni indicated that he resisted the urge to increase income tax and VAT, considering the raising of VAT in the current economic climate as “fool-hardy”. He, however, announced an increase on sin tax with the promise to work against illicit criminal activities.
Regarding Eskom, the Minister indicated prior to his speech that although GEPF bailout in respect of Eskom’s debt is a good idea, however, if we aim to “save Eskom” then we all need to save Eskom. Be that as it may, the 2020 budget speech did little to advise in how we are going to deal with Eskom’s with Mboweni indicating that the budget speech was not necessarily dealing with Eskom.
Despite the aforementioned concessions in respect of the relative tax’s amongst others, the 2020 budget speech did little to settle the growing level of economic angst in the country. We can only hope, that the concessions made are enough to garner investment, job creation and furthermore ease the pain of the everyday tax-payer.