By Lehlohonolo Lehana.
Photo Credit: Nigel Sibanda.
Budget 2024 avoided direct tax increases but a lack of inflation adjustments to Personal Income Tax brackets will indirectly extract more taxes from households.
Minister of Finance Enoch Godongwana delivered his Budget Speech 2024 to Parliament and the nation on 21 February.
A key announcement was that tax rates will not be increased in 2024/2025, as previously signalled by the Medium-Term Budget Policy Statement (MTBPS) 2023, to generate the extra R15bn needed in revenue. Instead, National Treasury will extract more direct taxes from the economy – and from households in particular – by not making inflationary adjustments to the Personal Income Tax (PIT) brackets and medical aid credits.
“While Budget 2024 has avoided directly increasing tax rates in search of an extra R15bn in revenues, tax rates are being indirectly increased by not making inflationary adjustments to PIT brackets. Keeping the PIT brackets unchanged alongside inflation adjustments to workers’ income results in a component of the labour force moving into higher tax brackets and therefore paying more PIT. This increases the burden of taxes on the average South African.” Mbai Rashamuse, PwC Southern Africa Tax and Legal Services Leader.
National Treasury signalled optimism in Budget Review 2024 about economic growth over the medium term, forecasting an average real GDP growth rate of 1.6% p.a. during 2024-2026.
“National Treasury forecasts average economic growth of 1.6% per annum in 2024-2026. This shows their faith in the momentum of key structural reforms as well as interventions currently underway to address challenges in energy, logistics and public safety. The private sector is assisting Government in addressing these challenges, with 2024 being the year where tangible results will have to be delivered to boost business and investment sentiment to the levels needed to accelerate economic growth. However, we need a faster rate of growth than 1.6% p.a. beyond 2026 to really change the trajectory of the South African economy and to keep up with population growth.” Lullu Krugel, PwC South Africa Chief Economist.
Shirley Machaba, PwC South Africa’s CEO, opened the event, followed by a robust panel discussion facilitated by Bruce Whitfield, an award-winning journalist and best-selling author.
Prof Bonang Mohale – Chancellor of the University of the Free State
Bruce Whitfield – Award-winning journalist and best-selling author
Ferial Haffajee – South African editor and journalist
Prof Osman Mollagee – PwC Tax Partner
Xhanti Payi – PwC Senior Economist
South Africa has experienced more than a decade of weak economic growth. GDP growth has averaged only 0.8% annually since 2012, entrenching high levels of unemployment and poverty.
Over the next three years, tax revenue is expected to grow by R401.7 billion, reaching R2.13 trillion in 2026-27 and a tax-to-GDP ratio of 25.3%.