CRS News Flash 22 February 2024 – Budget Speech and Tax Proposals for 2024-2025

It is important that employers note the following:

2024/2025 Budget Speech and tax proposals

The Minister of Finance, Enoch Godongwana, delivered the Budget Speech for the fiscal year 2024/2025 on Wednesday, 21 February 2024.

Highlights of the Budget Speech:

·        The consolidated budget deficit is projected to narrow from 4.9% of GDP in 2023/24 to 3.3% by the end of the 2024 medium-term expenditure framework (MTEF) period.

·        Revenue collection in 2023/24 has weakened significantly relative to projections in the 2023 budget, and tax revenue for 2024/25 is expected to amount to R1.86 trillion.

·        Real GDP growth is projected to an average of 0.6% in 2023. This is down from 0.8% growth estimated during the 2023 medium-term budget speech.

·        Government debt is expected to peak at 75.3% of GDP in 2025/26, with debt service costs as a share of revenue peaking in the same year.

·        Government again proposes no changes to the general fuel levy or the Road Accident Fund levy, resulting in tax relief of around R4 billion.

·        Over the next three years, government will make three transfers to Eskom for capital and interest  payments. Transfers in each of these years are R2 billion lower than projected, as a result of the entity’s failure to conclude disposal of Eskom Finance Company, as stipulated in the debt relief conditions.

·        For the first time in two decades government is forced to tap into SA’s Gold & Foreign Exchange Contingency Reserve Account (GFECRS). The settlement amounts to R150 billion over the medium term. As a result, government’s gross borrowing requirement is projected to decrease from R553.1 billion in 2023/2024 to R428.5 billion in 2026/2027.

Tax proposals

·        No increases of income tax, VAT or fuel levies.

·        No inflation adjustments to personal income tax tables and medical tax credits.

·        Daily amounts in respect of meals and incidental costs (daily and overnight) were increased.

·        Treasury will be hiking other taxes to make up the additional revenue. This includes increasing excise duties on alcohol between 6.7% and 7.2%, while duties on tobacco products will increase by between 4.7% and 8.2%.

·        SA will implement a global minimum corporate tax, with multinational corporations subject to an effective tax rate of at least 15%, regardless of where their profits are located.

·        The two‐pot retirement system will be implemented in 2024/25.

·        Producers of electric vehicles in the country will be able to claim 150% of qualifying investment spending as an incentive to aid the transition to new energy vehicles.

For ease of reference, the most important information relating to taxes for employers are illustrated below: