Hooray and whoop-de-doo: No tax increases likely in 2019
For the first time in years significant tax increases may not be required in the February 2019 budget
South Africans could be saved from tax increases in 2019, a report from PricewaterhouseCoopers (PwC) suggests.
The report comes a week before Finance Minister Tito Mboweni delivers the medium-term budget policy statement in parliament. According to PwC, the Treasury is largely expected to maintain its February forecast for tax revenues for 2018-19.
While a downward revision for corporate income tax is expected, it will be largely offset by an upward revision for value-added tax (VAT) and import duties, reads the report. “For the first time in a number of years it is looking likely that further significant tax increases may not be required in the February budget, something that the government would want to avoid in an election year,” PwC head of tax policy Kyle Mandy said.
This is despite SA falling into a recession for the first time since the global financial crisis 10 years ago. Former finance minister Nhlanhla Nene warned in September that the recession could dent tax revenue collections.
The government has collected less tax than expected in recent years and South Africans have felt the sting of incremental tax increases. In the February budget a controversial decision to increase VAT by one percentage point was made. This was the first increase since 1993.
In the 2018 budget, South Africans were hit with an estimated R36bn in new taxes. But according to the PwC report, if tax collections continue to perform as they have done in the first five months of 2018, the budget forecast will be exceeded by between R8bn and R11bn by February. The biggest contributor to this figure is an increase in the VAT collections.
Despite the outcry, VAT collections were at 19.5% in August, well above the forecast of 16.8% for the year. The additional zero-rated items suggested by the VAT panel could, however, shave R6bn off revenue if announced next week.