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NOVEMBER 2020 – SOUTH AFRICA
MEDIUM TERM BUDGET POLICY STATEMENT
It is important that employers note the following:

Highlights of the Medium-Term Budget Policy Statement

The Minister of Finance, Tito Mboweni, delivered the Medium-Term Budget Policy Statement on Wednesday, 28 October 2020.

Mboweni said that South Africa will take years to get back to pre-Covid GDP levels, with a sharp 2020 Covid‐19 recession hitting first, before real GDP growth starts climbing again.

The 2021 outlook is more uncertain.

Highlights summarised

·        The current year’s tax revenue is projected to be R8.7billion lower than the June budget estimate. Gross tax revenue will be 17.9% lower than collections in 2019/20.

·        The consolidated deficit narrows from 15.7% of GDP in 2020/21 to 7.3% by 2023/24.

·        Gross national debt is projected to stabilise at 95.3% of GDP by 2025/26.

·        The tax‐to‐GDP ratio is only expected to recover to the 2019/20 level by 2027/28.

·        No new tax proposals were introduced. The Government continues to project tax increases of R5 billion in 2021/22.

·        Cabinet decided to extend the social relief of distress grant to the end of January 2021 and will direct R6.8 billion from the public employment programme allocation.

·        Mboweni also announced that R10.5 billion has been allocated to SAA to implement the business rescue plan.

·        Government proposes consolidated spending of R6.2 trillion over the 2021 Medium Term Expenditure Framework,  of which R1.2 trillion goes to learning and culture, R978 billion to social development and R724 billion to health.

·        Improved tax collection and administration continue to be essential to fiscal consolidation.

·        No additional funding was earmarked for the tax administration to rebuild its capacity.

·        The near-term objectives for the tax administration include:

·        Finalising a tax gap study in December 2020

·        Focusing on international taxes, particularly aggressive transfer pricing;

·        Increasing enforcement to eliminate syndicated fraud and tax crimes;

·        Continuing to leverage third-party data to identify non-compliant taxpayers

·        Greater compliance enforcement of PAYE (Pay As You Earn) and Value Added Tax.

·        All NEDLAC constituencies have reached agreement for the annuitisation of provident funds to take effect in March 2021, to enable all members to continue to benefit from tax deductions on their contributions.

 

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