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A government economic recovery program, to be introduced by President Cyril Ramaphosa this week, proposes a series of tax increases for the country.
The document of more than 100 pages, which has been viewed by Bloomberg, is an attempt to counter the effect of the Covid-19 pandemic which is expected to result in South Africa’s largest economic contraction in nearly nine decades.
The document, prepared by the President’s Economic Advisory Council, proposes that a series of tax increases and changes be considered, including:
- Fuel and estate tax increases;
- A three-year ‘solidarity tax’ that would raise taxes for those who earn the most;
- Introducing a basic income subsidy that could cost R243 billion a year and would require tax increases;
- Pension funds and other private investors that support infrastructure projects if there is a clear portfolio for the next 10 to 20 years.
These proposed changes align with comments made by the National Treasury in a July MP. presentation.
At the time, Chief Director Edgar Sishi said that the National Treasury is considering a series of new fiscal measures, as the government seeks to raise an additional 40 billion rand through raises in the coming years.
In his presentation, Sishi said the Treasury was considering investigative reports from the Davis Tax Committee on the possible introduction of new measures, including the feasibility of a Health tax and how it relates to a property tax and an inheritance tax.
“We are analyzing these recommendations. It is important to remember that the fiscal amendments of the last five years have included some of these proposals and we are analyzing additional proposals for the 2021 budget ”.
Citing Finance Minister Tito Mboweni’s speech on supplementary budget at the end of June, Sishi said there will be tax increases of 40 billion rand over the next four years to help stabilize the country’s debt.
In June, Mboweni said selected clients that the Treasury is discussing the possibility of a inheritance tax and a call solidarity tax in an attempt to raise additional funds.
Taxes on the rich are favored politically and a solidarity tax associated with the virus outbreak would be limited in duration.
In South Africa, the maximum income tax rate is 45%, corporation tax is 28%, and VAT is 15%.
Read: Taxpayers will pay the bill for the proposed R243 billion universal income program in South Africa
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