The government says tax revenue for the current year is expected to be significantly lower than the estimates in the 2019 medium-term budget. It has been revised down by R10.7 Billion.
Mboweni was delivering his budget speech in parliament on Wednesday.
Treasury says the current economic environment makes it very difficult to increase taxes. This has forced the government to propose no further changes in tax rates – except annual adjustments in personal income tax brackets, levies and excise duties in line with inflation.
This means those earning R460 000 per annum will get a tax relief of R3400 a year. Those earning R265 000 will see their taxes reduced by just over R1500 per year.
— Luvuyo Mdeni (@iLuvuyo) February 26, 2020
Livestream: Finance Minister’s Budget Speech
New excise duty
Motorists will see an increase of 25cents per litre in the fuel levy, which consists of 16 cents per litre in general fuel levy and 9 cents increase in the Road Accident Fund levy (RAF).
Consumers will pay more for sin tax. This consists of an increase in excise duties on alcohol and tobacco between 4.4% and 7.5%.
The government will also introduce new excise duty on sub heated and heated tobacco products, including e-cigarettes- this will be taxed at a rate of 75% of the cigarette excise rate with immediate effect. There will also be an increase in the annual contribution limit to tax-free saving accounts by R3000 from March 1, this year.
In the video below we take a look at the Budget speech preview:
Economy in trouble
The budget showed that the economy is in deep, deep trouble. As our colleague Amina Accram reports, debt to GDP currently stands at over 60% while the government is also running out of options to find innovative ways to tax consumers.
She says “Mboweni’s budget shows the extent of economic and financial challenges the country is facing. His budget warns of shortfalls in revenue collection and increasing debt servicing costs standing at R229 billion.”
South Africa is also a long way from serving Eskom’s debt which is at R450 billion. Amongst other challenges government can no longer increase taxes because its population is either unemployed or tightly squeezed.
But Mboweni says he remains upbeat about the public wage bill which is expected to decrease by more than 100 billion Rands in the next three years.
— SABC News Online (@SABCNewsOnline) February 26, 2020
You can read the Finance Minister’s full speech below: