2020 Budget speech highlights
FINANCE Minister Tito Mboweni has been described in the media as colourful and overly relaxed. He started his budget speech with his usual aloe reference: ‘The Aloe Ferox survives and thrives when times are tough. It actually prefers less water. It wins even when it seems the odds are against it.’
Let us dive into the details of the 2020 Budget speech in order to understand just how much of our hard-earned money we have to cough up this coming year, and whether it is being used for what we hope it will be.
The drowning state-owned entities were at the top of the list, with Eskom set to receive R112bn in the next three years, and a minimum R23bn for the seven years following thereafter. The 2019 budget forecasted a 1,5 per cent economic growth rate but the actual growth rate was a shocking 0,3 per cent.
The budget deficit for the past fiscal year soared from an expected 4,5 per cent to 6,3 per cent of GDP. This year’s deficit is the second highest on record, topped only by 7,1 per cent in the pre-democracy-inflated year of 1993.
The 2019 budget deficit was 4,2 per cent.
In the past, the traditional approach to reduce the budget deficit would be to increase taxes and try to cut spending in order to prevent South Africa from losing its investment grade debt rating.
But the 2020 budget did not follow that approach. Instead, there was no VAT increase and no wealth tax increase.
Finance Minister Tito Mboweni said that increasing tax would be counter-productive. Taxpayers received a vague promise that Treasury will cut R160bn from the public sector wage bill by freezing inter-band salary increases.
Personal income tax remains the state’s biggest source of income, contributing 38 per cent of total tax. A total of 308 000 taxpayers earn over a million rands a year, while a total of 6,8 million registered taxpayers earn less than R83 100 a year, the new tax threshold.
There was fractional relief on personal income tax with lower than inflation-adjusted tax rates.
There will be a renewed focus on illicit and criminal activity, including non-compliance by some religious public benefit organisations.
Religious bodies must operate within the strict boundaries of the law if they are to enjoy tax exempt status.
The annual contribution to tax free savings accounts has increased to R36 000 from March 1.
More than 18 million people now receive social security payments. Their grants will increase by between R20 and R80 per month in the year ahead. A change in the way social security is administered has saved R1bn a year.
There was a slight increase in the fuel levy (25c a litre), cigarettes will cost you 74c extra and the minister also said that electronic cigarettes (vapes) will be taxed from 2021 so maybe this will be the best time to think about quitting and saving yourself some money.
Please note that the above is for information purposes only and does not constitute financial or tax advice. As each individual’s personal circumstances vary, we recommend they seek advice on the matter. Please note that while every effort is made to ensure accuracy, Nexia SAB&T does not accept responsibility for any inaccuracies or errors contained herein. If you are in doubt about any information in this article or require any advice on the topical matter, please do not hesitate to contact any Nexia SAB&T office nationally.
Article prepared by: Aysha Osman
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