Tax hikes to look out for next week – including a higher fuel levy: Nedbank

Nedbank has published its preview ahead of finance minister Enoch Godongwana’s inaugural budget speech on 23 February.

The bank expects a number of tax increases to be announced, although these are likely to be light compared to previous years due to increased revenue collections.

“Revenue growth will moderate in line with GDP growth from 2022/23. We expect tax collections to ease to 5.8% in 2022/23 and average 5.9% over 2023/24 and 2024/25.

“We do not expect significant changes to tax rates in the year ahead, with the usual adjustments implemented.”

Nedbank said the most likely increases include:

• Inflation-linked adjustments to personal income tax brackets and rebates;
• Below-inflation general fuel levy increase of 30c/litre for petrol and diesel, and 15c/litre in the Road Accident Fund levy;
• The usual above-inflation increases in alcohol and tobacco excise duties;
• The corporate income tax rate remains unchanged at 28%.

“The rebound in economic growth, higher tax buoyancy, and a more efficient tax authority will support revenue growth over the Medium Term Expenditure Framework (MTEF) period,” the bank said.

“We forecast total consolidated revenue to be R404 billion and R656 billion above Medium Term Budget Policy Statement (MTBPS) and budget estimates, respectively, over the MTEF period.”

The finance minister’s maiden budget speech promises to continue with the prudent stance demonstrated in the 2021 MTBPS, Nedbank said. If achieved, the National Treasury will be on course to reduce the budget deficit and slow the pace of debt accumulation.

However, it warned that the government will have to balance elevated expenditure needs against slower revenue growth.

“As revenue growth moderates in line with the normalisation of economic growth, the budget deficit and public debt will remain above the median levels of B-rated countries over the MTEF. As a result, South Africa is unlikely to experience a significant improvement in credit ratings over this period.”

Investors will also be looking for more evidence of the ‘enabling’ business environment promised by President Ramaphosa in this year’s State of the Nation Address, Nedbank said.

“Within this context, expenditure needs to be directed to critical functions, particularly infrastructure spending, which would help ease existing constraints on private investment and job creation.”

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