South Africa plans to reduce corporate taxes and increase the exemption on foreign income earned by expatriates in a bid to attract investments and stem the emigration of high-earning citizens as revenue collections falter.<\/p>\n
Sluggish economic growth has led to tax revenue undershooting estimates, with the shortfall forecast at R63.3 billion ($4.2 billion) for the year ending March 31, the National Treasury said in the Budget Review Wednesday. That\u2019s R10.8 billion more than the gap forecast in October.<\/p>\n
The government\u2019s efforts to bolster revenue by raising levies on personal income, dividends, capital gains and value-added tax over the past five years have failed to arrest the debt trajectory, the Treasury said.<\/p>\n
\u201cHigher levels of economic growth are required for further tax increases to be effective in consolidating the public finances or financing additional expenditure.\u201d<\/p>\n
South Africa plans to reduce its corporate-income tax rate of 28% over the medium term to boost the country\u2019s competitiveness as an investment destination among emerging markets, while dissuading companies from \u201cprofit shifting,\u201d the Treasury said.<\/p>\n
Corporate taxes account for 16% of government revenue.<\/p>\n
It won\u2019t increase direct taxes on individuals, rolling back on a 2019 pledge to aid fiscal consolidation by collecting R10 billion in additional revenue. It plans to raise R1.58 billion in fiscal 2020-21.<\/p>\n
While the government considered proposing tax increases, it decided against it due to \u201cthe weakness in the economy,\u201d the Treasury said.<\/p>\n
Key tax proposals:<\/p>\n