Milpark’s School of Commerce comments on the 2021 budget speech.
Shaaira Sackoor – Tax Lecturer, School of Commerce
BCom Accounting degree, Honours in Accounting with a specialisation in tax, MCom in South African and International Tax.
Serame Ramosajana – Head of the School of Commerce
BCOMPT HONS /CTA, CA(SA)
Shaaira comments, “I think this is a fair budget considering the current economic circumstances facing South Africa at the moment. The impact of the Covid-19 pandemic and the lockdown restrictions on the South African economy will have long lasting effects. The Minister is forced to navigate the economy through this storm in the best way possible. He needed to ensure that there would be limited impact on the low income earners as well as the many South Africans who have lost their jobs and, at the same time he needs to ensure the collection of enough tax revenue to fund expenditures and overcome the current debt levels experienced by government. He chose not to overburden taxpayers through additional tax revenues. However, our debt levels have increased from 65.6% to 80.3% of GDP.
The positives from the budget came from the adjustment of the personal income tax brackets and rebates above inflation, this means that individuals will take home more money from the end of March depending on the tax bracket of the individual. This will provide a relief to low and middle income earners.
The change in the corporate income tax rate to 27% from next year will be welcomed by many businesses and is a drive from the Minister to encourage investments into South Africa. South Africa has a very high corporate tax rate currently and a reduction of this could result in possible investment which in turn could create job opportunities.
The high increase in the fuel levy will negatively impact all sectors of the economy. The low income earners and the many South Africans who do not earn an income will likely bear the brunt of the increase.
It was expected for the Minister to increase sin taxes especially considering the impact that alcohol and tobacco has had on the pandemic. Government is looking to discourage the excessive consumption of alcohol. The increase however is likely to have a negative impact on an already struggling alcohol and tobacco industry. This industry has experienced a number of job losses over the past year and with the increase in the sin tax is expected to see a decrease in sales revenue.
The announcement of the expenditure on the vaccines, around R10 billion over 2 years is much needed by South Africans. In order for the growth of the economy, we need to curb the spread of the virus and overcome this pandemic. This will hopefully help to re-boost the economy as well as save lives in future.”
Shaaira ends by adding, “While the economic outlook is still bleak, government is trying to find ways to support economic recovery.”
Serame, Head of the School of Commerce, comments, “The current unemployment rate of 32.5% in the fourth Quarter of 2020 has also contributed negatively to the general outlook of the economy of the country and as a result, the Minister had limited options available to increase revenue collection from individual and corporate taxes. As outlined above, a significant number of companies had to close down during the COVID-19 pandemic and some are still feeling the after effects of the lockdown. Therefore, it was deemed necessary that the corporate tax had to be reduced, in order to assist these struggling entities.
25 Feb 2021