Budget Speech 2022 Tax Proposals

 

Madam Speaker, households and businesses are still under financial pressure and are coping with higher obligations, the effects of COVID-19 and increased fuel prices.

 

Now is not the time to increase taxes and put the recovery at risk!

 

Accordingly, we have decided to keep money in the pockets of South Africans.

 

This Budget includes R5.2 billion in tax relief to help support the economic recovery, provide some respite from fuel tax increases, and boost incentives for youth employment.

 

Madam Speaker, our tax proposals for 2022/23 are as follows.

 

Personal Income Tax

 

The personal income tax brackets and rebates will be adjusted by 4.5 percent, in line with inflation.

 

The adjustments will mean that the annual tax-free threshold for a person under the age of 65, will increase from R87 300 to R91 250.

 

Medical tax credits will increase from R332 to R347 per month for the first two members, and from R224 to R234 per month for additional members.

 

Employment tax incentive

 

The employment tax incentive will be expanded through a 50 per cent increase in the maximum monthly value to R1 500.

 

I encourage small and medium firms to take up this incentive.

 

We anticipate that the expansion will provide additional support worth R2.2 billion.

 

Fuel Levies

 

In 2021, the inland petrol price breached R20 per litre. The higher prices have put pressure on the cost of transport, food and other goods and services.

 

To provide some relief to households, no increases will be made to the general fuel levy on petrol and diesel for 2022/23. This will provide tax relief of R3.5 billion to South Africans.

 

There will also be no increase in the Road Accident Fund levy.

 

Minister Mantashe and I have agreed that a review of all aspects of the fuel price is needed.

 

Our teams have already begun to engage on this critical work.

 

Corporate Income Tax

 

Restructuring the corporate income tax system is an important part of our efforts to create a conducive environment for businesses to grow, increase investment and employ more people.

 

As announced in the 2021 Budget, the corporate income tax rate will be reduced from 28 per cent to 27 per cent, for companies with years of assessment ending on or after 31 March 2023.

 

This will be complemented by base-broadening measures to ensure that there is no negative impact on revenue.

 

Excise duties

 

Excise duties on alcohol and tobacco will increase by between 4.5 and 6.5 percent.

 

The increases mean that as from today:

 

 

Government also proposes to introduce a new tax on vaping products of at least R2.90 per millilitre from 1 January 2023.

 

A new tax will also be introduced on beer powders.

 

After three years of no changes, the health promotion levy will be increased to 2.31 cents per gram of sugar.

 

Madam Speaker, the structure of the economy will need to change to adapt to the needs of addressing climate change.

 

As we reduce emissions, communities must not be left behind as production shifts to greener solutions.

 

There are opportunities to access international finance to help pay for this just transition. The National Treasury is working with the new head of the Presidential Climate Finance Task Team, on accessing these resources.

 

The carbon tax is the main mechanism to ensure we lower our greenhouse emissions.

 

The carbon tax rate will increase from R134 to R144, effective from 1 January 2022.

 

As required by legislation, the carbon fuel levy will increase by 1c to 9c per litre for petrol, and 10c per litre for diesel, from 6 April 2022.

 

The first phase of the carbon tax, with substantial allowances and electricity price neutrality, will be extended to 31 December 2025.

 

However, in line with our commitments at COP26, the carbon tax rate will be progressively increased every year to reach $20 per tonne.

 

In the second phase from 2026 onwards, the carbon tax rate will have larger annual increases to reach at least $30 by 2030, and the allowances will rapidly fall away.

 

We urge all our companies that have not already done so to develop plans to progressively reduce their emissions over the next 10 years, otherwise they will face these steep taxes.

 

Our exporters will also face overseas border taxes for carbon-intensive goods such as iron and steel, which will reduce their competitiveness.

 

Madam Speaker, you will note that we have not increased taxes in the major revenue generating categories, such as personal income tax, VAT and the general fuel levy.

 

We have reduced the corporate tax rate and broadened the tax base.

 

However, let me restate my earlier caution, that if there are permanent expenditure increases in the coming years, we would have no choice but to revisit this to ensure the fiscal deficit does not worsen.

 

Madam Speaker, in these trying times and without compromising our ability to collect revenue, we have managed, through these tax proposals, to keep money in the pockets of South Africans, and to create conditions for greater investment in the economy.

 

Financial sector reforms

 

Retirement funds play a critical role in channelling savings into productive investments. Regulation 28 of the Pension Funds Act sets out the criteria through which these funds may make investments.

 

Changes have been proposed to these regulations to enable greater investment in infrastructure by these funds. After consultation on these changes, the amendments will be gazetted next month.

 

Government has also proposed a fundamental restructuring of the retirement system for individuals to allow for greater preservation and partial access to funds through a “two-pot” system.

 

Part of this proposal includes the possibility of short-term access, which would be dependent on the approval by trustees of each fund.

 

Consultations are proceeding following the release of a discussion paper last year and the draft legislation on these amendments will be published for comment in the middle of the year.