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The National Treasury has outlined some of the key tax proposals it has received in response to the Medium Term Budget Policy Statement (MTBPS) from Finance Minister Tito Mboweni.
In a parliamentary briefing on Friday (November 6), South African National Treasury Chief Director Edgar Sishi said that more than a dozen organizations submitted responses to the MTBPS, including civil society groups such as Outa, as well as institutions financial institutions such as Old Mutual.
“The MTBPS generally does not include tax proposals, however, he reaffirmed that the government plans to increase taxes in the 2021 budget to raise an additional 5 billion rand in revenue by 2020/21.
“(The Treasury) continues to project an additional R10 billion in revenue in 2021/22, R10 billion in 2022/23 and R15 billion in 2023/24 from fiscal measures,” he said.
Sishi said that all proposals will be considered when determining the mechanisms for raising revenue over the next four years. Some of the key proposals are described in more detail below.
Health tax
This would mean an increase in the rate of the health promotion tax, commonly known as the “sugar tax”, as well as an expansion of the tax base to include fruit juices.
The Treasury first introduced the health promotion levy in 2018.
The levy applies to sugary drinks that are made or imported into South Africa. Currently, the tax applies to carbonated beverages like Coca-Cola.
Health tax
This would see an increase in tax revenue through an increase in taxes on high net worth individuals.
Consistent with this proposal is limiting deductions, such as contributions to the retirement fund, as well as an increase in taxes on capital gains and taxes on securities transfers.
Increasing debt should be addressed by raising more resources from wealthy and high-income individuals and large profitable companies, which is also essential to reducing inequality, according to the Budget Justice Coalition (BJC), a think tank representing various organizations. , including Equal Education. , Section 27, and the Institute of Economic Justice.
“This requires seeking to tax historically accumulated income, through the implementation of a progressive net worth tax. In the medium term, it will be essential to increase taxes on high net worth individuals and increase the capacity of SARS to ensure tax compliance, ”said the BJC.
The group said there are thousands of South Africans who have net assets of $ 1 million or more, and 2,070 South Africans who have net assets of $ 10 million or more.
This shows that the country still has large sources of wealth, despite a weak rand and ongoing emigration of the very rich, with roughly 3,000 HNWI leaving South Africa over the past decade, he said.
However, the Treasury noted that some proposals called for the opposite to happen and that taxes should be lowered for those who earn more.
The argument is that lowering taxes at the upper end of the income distribution to encourage wealthy people to stay in South Africa and continue to contribute taxes and expand their businesses to create jobs.
Land tax
One of the proposals includes replacing the income tax with a land tax based on the comments made in the MTBPS 2018.
“The government recognizes the potential improvements in the efficiency of taxes on land (and property), as highlighted in the OECD report ‘Taxes and Economic Growth’,” it said in a 2019 report. reply.
“Land is an immobile form of capital, the value of which can increase due to public spending to improve nearby infrastructure.”
The National Treasury said it has been holding and attending workshops to explore this issue. There are important practical and intergovernmental agreements that need to be explored further.
“The instrument can potentially improve the efficiency of the tax system, but it is unlikely to be a sufficient source of income to replace all other tax instruments,” he said.
Read: Businesses and wealthy South Africans should pay more taxes: Expert group
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