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‘Budget Speech unlikely to bring relief to long-suffering taxpayers’

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The National Budget Speech scheduled for this week (Wednesday) is unlikely to bring any relief to long-suffering taxpayers. Despite the economic growth projections of nearly 1% this year, tax experts have warned that the country’s fiscal situation remains precarious.

However, the government is expected to implement inflationary adjustments to address bracket creep, aiming to satisfy workers. Bracket creep occurs when an increase in income leads to higher tax liability.

South Africa’s revenue shortfall highlighted in the Medium-Term Budget Policy Statement is projected to reach R56 billion this year. Experts say that the government will have limited flexibility to provide additional tax relief to consumers despite it being an election year.

Meanwhile, the Mid-Term Budget for 2023/24 has shown that the country is reducing expenditure on social grants.

Associate Professor at the University of Cape Town, Deborah Tickle says there is no room to reduce tax.

“We have got 1,6% of the people in South Africa paying the majority of the tax. There is no room to reduce that tax. There are no enough people. What we need in this country is growth so that more people can earn more so that they can pay tax. We all know that the fuel levy results in inflation or petrol prices generally and diesel prices. I think people in this country are already facing very difficult times with high interest rates and high inflation and we have prices increasing and increasing unemployment.”

Bryan Hirsch from Bryan Hirsch Colley and Associates says the implementation of the two-pot retirement system is anticipated to start on September 1st this year. Under this system, Pension Fund Members will have the option to withdraw up to R25 000 from their pension fund. However, the drawback is that this withdrawal is likely to be subject to taxation at a lower tax rate.

“Treasury and the funds have come to an agreement that this is going to be delayed from the 1st of September. We may hear something sooner but at this point and time, it will not come into effect until then. The one big thing that is also over hanging is the potential for NHI because that is now on our president’s desk for signing with NHI. The tax credits might be taken away and this was helping to offset the costs of medical aid,” says Hirsch.

Individuals who installed Rooftop solar panels are likely to continue to receive a tax rebate of 25% of the cost of new and unused solar panels. And companies can also claim a tax deduction of 125% for installing renewable energy.

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