Cape Town - Ahead of Finance Minister Enoch Godongwana’s Budget Speech today, experts have predicted there would be no increase in personal income tax rates although the possibility of an increase should not be ruled out.
Godongwana is expected to deliver the budget at 2pm.
IntelligENS predicted that no announcement on an increase in personal income tax would be made, with the highest marginal tax rate for individual taxpayers remaining unchanged at 45%.
PricewaterhouseCoopers (PwC) said revenue collection for the 2023/24 fiscal year underperformed the original budget estimate in 2023.
“National Treasury made a significant downward revision to this figure in the Medium Term Budget Policy Statement 2023 (MTBPS) by R56 billion to R1.731 billion, mainly led by substantial decreases in the expected corporate tax collections of R36 billion and VAT of R26 billion due to higher refunds.
“Based on our projections, we expect revenue collections to be broadly in line with the revised estimates in the MTBPS 2023.”
PwC said that while personal income tax revenues should be better than those estimated, higher revenues were expected to be largely offset by lower than estimated revenues for VAT, customs duties, and excise duties.
“As mentioned in previous years, we would like to see significant personal income tax relief, but realistically, this is unlikely to happen until such time as the fiscal deficit is brought under control and the tax base is broadened,” the firm said.
Senior tax consultant at CMS South Africa, Ahmed Jooma, said the Budget was based on parameters set in 2021 within the Country Partnership Framework (CPF) agreement between the Treasury and the World Bank Group.
“The Budget is expected to adhere to these predefined parameters, even in an election year, without veering towards a populist approach.
“The CPF focuses on implementing budget cuts affecting social spending, privatising state assets, increasing private sector involvement in infrastructure and social services, right-sizing the public sector wage bill, enhancing labour market flexibility, and maintaining the state’s ability to manage debt and honour guarantees to lenders of state-owned enterprises by achieving and sustaining a primary surplus,” said Jooma.
Meanwhile, Cape Town mayor Geordin Hill-Lewis urged Godongwana not to cut grant funding to municipalities and provinces as part of austerity measures.
He said that more than R107 million had already been cut from housing and informal settlement grants to Cape Town in the current financial year as part of nationwide cuts confirmed in the October 2023 MTBPS.
“I am calling on the Finance Minister to protect grant-funding and equitable share allocations to municipalities over the next three years.
“We strongly object to any further anti-poor budget cuts to national funding, which would mean even deeper cuts for Cape Town’s pro-poor spending priorities, particularly for basic services and housing,” said Hill-Lewis.
“Rather than cutting spending that delivers to the poor, cuts should come from government departments that serve no meaningful purpose.”