Big tax risks for South Africa – as countdown to Budget 2024 begins
National Treasury is entering its close-out period ahead of the 2024 Budget, with Finance Minister Enoch Godongwana extending an invitation to the public at large to give inputs and suggestions on how to balance the books.
The close-out period runs from 22 January to 20 February 2024, where officials and managers at the finance department will be heads-down, getting the budget ready to be presented thereafter.
While the date has not been officially set, analysts have pencilled in 21 February for Budget Day.
In the meantime, as is the annual tradition, Godongwana is seeking input on various budget items that impact South Africans’ lives, including matters related to tax revenue, flailing state-owned companies, and crumbling municipal finances.
The finance minister has already conceded that the 2024 budget will be a challenging one, as the country faces a massive budget deficit that needs to be addressed – but there are no easy answers.
The two main avenues of addressing the financial shortfall – budget cuts or increased taxes – bring with them major risks, and neither are palpable or politically convenient in what is shaping up to be a critical election year for the country.
Increased tax revenue is already on the table, with the mid-term budget in October 2023 pointing to an additional R15 billion in taxes to be strapped onto the budget in 2024.
Analysts have noted that this could be raked in by simply not adjusting the tax brackets for inflation – but the possibility of higher taxes or new taxes has not been written off.
Godongwana himself said that tax hikes are still a possibility, though he admitted the challenge of implementing them in the current economic environment – making them unlikely.
Further budget cuts, meanwhile, have not been received well by departments and government entities affected.
Momentum warned that too many cuts – especially to social programmes – could have dire consequences for South Africa in the form of social unrest and protests across the country.
Economists, meanwhile, have warned that pushing up taxes or targeting specific groups (like with a wealth tax or higher corporate tax) raises the risk of increased tax evasion and capital flight – individuals and companies will simply leave.
These are not the only problems South Africa faces with the budget, though.
According to the National Treasury, the minister is seeking input and a whole list of challenges, including:
- Municipal finances
- Spending priorities of the government
- Addressing a large budget deficit
- Stabilising State-Owned Entity finances
- Managing the energy crisis
- Tax revenues, and
- Debt sustainability
Contributions can be sent through the National Treasury’s website.
“Please keep contributions concise and to the point,” Treasury said.
The closing date for submissions is 11 February 2024.
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