Analysis of the Budget 2024
The 2024 South African budget plans to save more and stabilize the country's debt within the next few years, aiming for a healthier financial situation by 2025/26. Despite planning to spend up to R2.6 trillion by 2026/27, it doesn't directly raise taxes. Instead, it introduces other ways that could increase costs for families and businesses. This approach is about being careful with money while still ensuring important public services are funded.
A Closer Look at Tax and Revenue Measures
Tax Adjustments
Even though tax rates will not be increased, the lack of inflation adjustments to the personal income tax tables and medical tax credits effectively raises taxes. The decision was made not to increase personal income tax rates but also not to adjust tax brackets for inflation effectively constitutes a "stealth tax." This approach means individuals will pay a higher amount of tax in real terms due to inflation, even though the nominal tax rates remain unchanged. This method indirectly increases tax revenue for the government without formally raising tax rates, impacting taxpayers' real income.
Excise duties on alcohol products will increase between 6.7 and 7.2 per cent, while duties on tobacco products will increase between 4.7 and 8.2 per cent.
Relief is provided through unchanged fuel and Road Accident Fund levies.
The global minimum corporate tax rate implementation at a 15% floor and electric vehicle production incentives marks significant corporate taxation shifts. More than 140 countries have committed to implement a new global tax agreement aimed at ensuring multinational companies pay a minimum rate of tax. Global minimum tax which was proposed by the Organisation for Economic Co-operation and Development (OECD), imposes a minimum effective rate of 15% on corporate profits. The policy is aimed at ending the benefit of shielding multi-billion-dollar profits in tax havens. It is also intended to remove the incentive for nations that operate as tax havens for corporate giants.
Electric vehicle manufacturers in South Africa are incentivized with a substantial tax deduction, allowing them to claim 150% of their investment in qualifying expenses. South Africa is contemplating significant subsidies for electric vehicles (EVs), even as global trends show a shift towards hybrid vehicles, as highlighted by Toyota's strategy to focus on hybrid technology. This approach by Toyota and other carmakers suggests a nuanced path towards electrification, balancing between the current hype for fully electric vehicles and the practicality of hybrids.
Revenue Projections
Personal income tax remains a significant revenue source, with VAT and corporate income tax following. The detailed revenue and expenditure frameworks underscore the government's balanced approach to fiscal consolidation, with particular emphasis on supporting the social wage and ensuring the sustainability of public service salaries. The government proposes tax increases totaling R15 billion in 2024/25 to alleviate immediate fiscal needs.
Expenditure and Economic Outlook
Strategic government expenditure allocation focuses on ensuring a balanced allocation across essential services and fostering economic stability. It earmarks significant funds towards learning and culture, healthcare, social development, and infrastructure improvements. This planned spending reflects the government's commitment to enhancing the quality of life for its citizens, addressing urgent social needs, and laying a foundation for sustainable economic growth. Through these allocations, the budget aims to support critical sectors while managing fiscal responsibilities prudently. The macroeconomic outlook projects modest growth, with GDP forecasts averaging 1.6% from 2024 to 2026, hinting at a gradual economic recovery. Accountants should note the implications of these projections on business planning and investment strategies.
Practical Implications for Bookkeepers and Accountants
Bookkeepers, accountants, and tax practitioners play a pivotal role in protecting businesses from the potential overreach of revenue officials by ensuring rigorous documentation, accurate categorization of expenses, and adherence to the latest tax legislation. Implementing systematic record-keeping, utilizing reliable accounting software for clear audit trails, and consulting with tax professionals on complex transactions are essential strategies. These professionals should also maintain transparent communication with tax authorities and be proactive in resolving discrepancies to prevent misunderstandings and unwarranted tax adjustments.
To inform employers or clients about these protective measures, professionals can create informative briefings or workshops detailing the importance of comprehensive documentation and the benefits of tax risk insurance. Highlighting case studies or examples where these strategies have mitigated tax disputes can underscore their value. Additionally, providing updates on tax legislation changes and how these affect their financial reporting and tax obligations can help maintain compliance and safeguard against potential issues with revenue services.
Conclusion
The 2024 budget paints a picture of tough times ahead and finding new ways to protect the fiscus and collect taxes from citizens, clearly focusing on fiscal stability, economic growth, and responsible governance. Accountants will find themselves at the forefront of interpreting and implementing budgetary measures, ensuring that their clients can navigate the complexities of South Africa's fiscal landscape effectively.
Find more details on the Budget Speech 2024 below:
-
National Treasury issued a Budget 2024 Highlights explaining the key contents of the Budget Speech.
Read the Budget Speech.
Look at the Budget Presentation.
Read the Tax Pocket Guide.
-
Read the highlights and analysis from PwC in the PwC post-Budget analysis 2024 document.
-
Use the letter template to send an alert to your client about the specific tax implications introduced in the Budget Speech.
Attend the CIBA Budget Speech Update 2024 (In-Venue Event)
Attend the live CIBA Budget event
Get updated with important and current changes in tax legislation introduced in the Budget Speech and the impact on the tax planning strategy for clients.
Understand how the proposed 2024 tax amendments will affect your business and your personal finances and how it impacts the economy.
Tax Risk Insurance
Tax Risk Insurance offers a unique protection for businesses, individuals, and trusts against the financial strain of SARS tax audits and related disputes. With the increasing focus of SARS on SMMEs, trusts, and High-Net-Worth Individuals, the financial repercussions of audits can be significant, potentially leading to bankruptcy or business closure. Tax Risk Insurance covers professional fees during these audits, offering access to top tax specialists and ensuring fair treatment. This insurance is a prudent investment to mitigate unexpected tax audit risks and secure financial stability.
Yes, I am interested in obtaining tax insurance for my client:
*Article image sourced from: https://www.gailsibley.com/2013/04/30/the-taxman-cometh-the-tax-collector-as-seen-in-art/
