As Wednesday, 21 February 2024, draws closer, many economists, businesses, and ordinary citizens will be eagerly awaiting Minister Godongwana's much-anticipated 2024 Budget speech. This annual address serves as a comprehensive overview of the nation's financial health, outlining tax amendments, expenditure plans, and revenue distribution strategies.
In essence, the Budget speech summarises the government's fiscal policies as well as how the government will fund its policies. Alongside this speech, critical legislation such as the Appropriations Bill, the Division of Revenue Bill, and Tax Bills are presented, collectively shaping the economic landscape for the year ahead.
Predictions
Many people are anticipating the announcement of Sassa grant increases during the budget speech. The finance minister normally reveals how much the value of grants will increase in April and October of the year.
Minister Godongwana may also discuss the future of the Social Relief of Distress (SRD) grant, including whether the grant’s monetary value will be increased. This comes after promises made by the President during the 2024 State of The Nation Address (SONA).
The Minister is also expected to announce adjustments to excise duties on alcohol, cigarettes, and vaping products.
According to Kyle Mandy, PwC's Tax Policy Leader, the National Treasury has indicated the need to implement tax increases of R15 billion. However, how these increases are implemented remains a point of contention.
Mandy suggests two primary avenues: adjustments to personal income taxes or increases in value-added tax (VAT).
The big question is how... The Minister's probably faced with two choices between personal income taxes and between VAT.
Mandy explains that while increasing VAT could potentially generate substantial revenue, the political landscape, particularly in an election year, may pose challenges to its implementation.
This is why Mandy suggests that personal income tax adjustments, particularly through fiscal drag—wherein tax brackets remain stagnant in the face of inflation—may be the more politically palatable option.
So, there's a strong possibility that instead of VAT, we will see a personal income tax increase. Whether that will be in the form of increases in the actual tax rates themselves or whether they will allow fiscal drag to push up the effective tax rates by not adjusting those brackets for inflation is probably the more likely option that we'll see.
