Warning over medical aid tax credits, wealth tax and more in South Africa

The 2025 Budget Speech is fast approaching, and South Africans have only a few days left to make their formal submissions to the National Treasury on what they want to gain from it.

Finance Minister Enoch Godongwana has invited South Africans and various stakeholders to submit their budget tips in preparation for the 2025 Budget in February.

Every year, the finance minister seeks input from the country on how to manage the state’s finances and what they want to get out of the budget.

It is not simply an empty gesture, either.

Speaking to PMG, the National Treasury explained that all suggestions and inputs made by South Africans go through a filtering process, where the top-made suggestions are sent on to policymakers, and the ‘winning’ suggestion is included in the budget.

The tip system, created in 1999 by former Finance Minister Trevor Manual, has seen increasing engagement from South Africans over the years, with a notable spike in 2023.

Treasury noted that 341 tips were received in 2021; 980 in 2022; 2,385 in 2023; and 855 in 2024.

2023 was, of course, the year where South Africa was in the throes of the worst levels of load shedding on record, sparking massive backlash from taxpayers and businesses.

This would explain the surge in interactions with the Treasury, as well as the budget measures introduced to address the crisis—like the one-year tax breaks on solar panels.

Over the years, the Treasury said that the most common input given through the tips system has been for higher allocations for social services, health and education—while businesses and individual taxpayers sought tax relief.

Taxpayers and businesses should again focus sharply on tax issues for the 2025 budget.

The government is scrambling to boost revenues with an expected tax shortfall of around R22 billion and is considering a host of tax proposals that could lead to higher taxes this year.

Responding to comments on the 2024 mid-term budget (MTBPS) in November last year, the Treasury highlighted at least 10 tax proposals that the minister would consider when setting up the budget.

One of the key proposals that has gained traction over the years is the introduction of a wealth tax.

The South African Revenue Service (SARS) is already focusing more on wealthy taxpayers—those worth over R50 million—and there have been calls to extend this by formalising a new progressive net wealth tax for high-net-worth individuals.

Other tax measures, like increasing inheritance, estate and luxury import taxes, have also been floated.

Medical aid tax credits are already as good as dead under the National Health Insurance Act—now law, but not in effect—but the end date is not yet set. This has been thrown in among the proposals for 2025.

According to the National Treasury, these are the key tax measures being considered for 2025.

• Increasing the number of VAT zero-rated items;
• Increasing the headline corporate income tax rate to 28%;
• Stronger measures to combat illicit financial flows;
• Introducing a progressive net wealth tax on high-net-worth individuals, and financial transactions taxes;
• Increasing PIT on high-income earners, along with increases in inheritance, estate, and luxury import taxes;
• Reducing tax evasion by, and reducing/eliminating tax breaks for high-net-worth individuals;
• Acceleration of measures to close existing tax loopholes;
• Removal of medical tax credits;
• Systematic review of tax incentives and removal of ineffective incentives;
• An increase of the Health Promotion Levy to the recommended 20%; and annual inflation-related increases thereafter.

Make a submission

It must be noted that, like the tax tips submitted by South Africans at large, these are just proposals and there is no indication that any will be implemented in the budget.

However, it does highlight the importance of taxpayers having their say on matters that might directly impact them.

The National Treasury said that South Africans also need to be aware that the Budget presented by the Minister is not the final budget but a proposal that has to be scrutinised and approved by Parliament.

This means that further engagement on the proposals and changes still have to take place and that South Africans will still have an opportunity during public consultation processes to change the shape of the budget.

As with previous years, Godongwana is looking for input on:

• Government spending priorities
• Addressing a large budget deficit
• Stabilising State-Owned Entity finances
• Energy funding solutions
• Tax revenues
• Debt sustainability
• Municipal finances
• any other economy-related topics

Submissions can be made on this web page, but should be concise and limited to 300 words. The deadline for submissions is 10 February 2025.