Mazars tax executive on the latest budget statement
Inflation-adjusted income tax brackets introduced in the latest budget statement by Finance Minister Tito Mboweni are a promising step towards reinjecting momentum in South Africa’s economy. This is according to Tax Partner at accounting and advisory firm Mazars Bernard Sacks.
The latest measures are a last ditch effort from the South African government to keep the country within investment grade, something that has come under threat recently. Personal Income Tax brackets have now been adjusted above inflation, which will increase the in-hand income for many South Africans.
The change represents a pivot in the policy direction that has emerged in recent years, which has seen tax rates increase in a bid to preserve government revenues. Now, South Africans will have more spending power, which is likely to boost economic activity in the country and reinject momentum.
The country has been suffering from economic stagnation recently, and low indications of improvements in the outlook as well as shortfall in the meeting of foreign investment targets has done little to encourage people to spend. The latest measure is a bid to improve this scenario.
“This is welcomed, given the need to stimulate the economy and promote growth,” said Sacks, who also explained the merits of South Africa’s corporate tax rates, which remain unchanged despite calls for a reduction amongst a number of economic experts.
“Accordingly, in an effort to promote economic growth, government intends, over the medium term, to restructure the corporate income tax system by broadening the base and reducing the rate. The base broadening proposals will involve minimising tax incentives, and introducing new interest deduction and assessed loss limitations,” explained Sacks.
“This change will increase transparency, reduce burdensome and unnecessary administrative approvals, and promote certainty. The capital flow measures take account of the Organisation for Economic Co-operation and Development best-practice Code of Liberalisation of Capital Movements and are aligned with similar approaches in other developing countries,” he added.
