Marketing & Media trends
- 3 big issues demanding legal attention this yearJonathan Veeran, Nozipho Mngomezulu and Burton Phillips
Construction & Engineering trends
- 3 major trends in the commercial property space in AfricaPeter Hodgkinson
- A bright horizon for South Africa's energy landscapeBarry Bredenkamp
- Achieving developmental goals through constructionCyril Vuyani Gamede
CSI & Sustainability trends
- Time for NPOs to show their real impactKeri-Leigh Paschal
- 5 sustainability trends that will shape business in 2021Christelle Marais
- 4 trends set to continue or be re-interpreted in the NGO sectorInnocent Masayira
- Strengthening NPO skills and processesNazeema Mohamed, Feryal Domingo and Soraya Joonas
- Sustainability is key for social investment in 2021Keri-Leigh Paschal
- 4 trends in employee skills development and training you need to know for 2021Siphelele Kubheka and Desikan Naidoo
Energy & Mining trends
- 10 predictions around fintechDominique Collett
- The 4 themes for the new yearAndrew Duvenage,
- 3 wealth management trends to watch in 2021Maarten Ackerman
- 4 strategies to rethink investing in SMEsKuhle Mnisi
- Microinsurance ready to reach new heightsMarius Botha
- Finding alpha in the age of Covid-19Nema Ramkhelawan-Bhana
- Purpose or profit. It's not a choiceMike Middleton
- Shifting towards a digital - but still human - approachHenry van Deventer
HR & Management trends
- 4 areas in which your business can practice its swivelFrancois Kriel
- 5G is coming. Here's what it could mean for SASamantha Naidoo
Logistics & Transport trends
Marketing & Media trends
- Tech democratisation will set the tone for 2021Andrew Smit and Johan Walters
- Auction industry survival depends on going virtualJoff van Reenen
- Covid-19 drives new trends in local property marketMarcél du Toit
- A bold year for beveragesAlex Glenday
- Acceleration of digital paymentsJonathan Smit
- Safety vs sustainability - the packaging industry's key conundrumNthabiseng Motsoeneng
- The evolving e-tail landscapeVilo Trska
#BizTrends2021: 'Wealth tax' unlikely to be government policy in near future as pressure on tax base mounts
Looking back at 2020, the most significant development on the tax front must certainly have been government's tax relief measures aimed at helping businesses mitigate the impact of the Covid-19 pandemic. These relief measures cost government an estimated R26 billion in direct relief provided, with a further R44 billion in the form of interest cost linked to the deferral of certain taxes. It is moreover estimated that government may lose as much as R300 billion in tax revenues in the wake of businesses either having to reduce operations or close shop permanently.
Dr Albertus Marais
The effect of the Covid pandemic led to government tabling a supplementary budget on 24 June 2020 to provide for an amended budget for the remaining part of its 2020/2021 financial year to address how the increased budget shortfall (compared to the February budget tabled) will be funded. As with any budget, government’s budget is also ultimately driven by the income that it is able to earn (predominantly in the form of taxes levied) and expenditure incurred in funding operations. It is therefore unsurprising that Treasury – both in the supplementary budget as well as in the medium-term budget policy statement of 28 October 2020 – announced that tax hikes will form part of future efforts to address future fiscal recovery measures.
What may be considered surprising, though, is the limited extent to which government intends to rely on increased tax revenues. In terms of the supplementary budget tabled, as well as the medium-term budget policy statement which reiterated government’s intention, National Treasury seeks to raise an additional R5 billion in tax revenue for the 2022 financial year, R10 billion in each of the 2023 and 2024 financial years and R15 billion in the 2025 financial year.
While objectively this may seem like a significant amount, considering that South Africa’s budgeted revenue annually exceeds R1.5 trillion, the extent by which tax increases are intended to cover budget shortfalls fades into insignificance. In fact, an average annual increase in tax revenues of 0.6% in real terms is actually a reduction in taxes going forward.
This means government has realised that the South African public is overtaxed and that further increases in tax rates cannot continue to shore up funding shortfalls. In raising taxes, government may actually prejudice tax revenue. As a result, talks of a so-called “wealth tax” being introduced is, in the view of this writer, completely misplaced, and certainly not government policy in the near future.
Treasury’s policy in addressing future funding shortfalls is clear: to limit expenditure, and specifically expenditure in the form of the public sector wage bill. The policy statement has now been consistently raised by government in the National Budget Speech in February of 2020 and in every address by the Minister during a significant policy debate in Parliament during this year, being that the public sector wage bill needs to be reduced significantly. This political hot potato is what will ultimately need to be confronted in 2021. Will Treasury’s policy manifest to reduce the public sector wage bill (which will inevitably also lead to a decrease in government debt and interest), or will the unions have the final say and force government’s hand to rely (arguably mistakenly so) on increasing tax revenues against an increasingly smaller tax base remaining in South Africa?
Put differently, will government be brave enough to take a longer-term view as to the health of South Africa’s public finances, or will short-termism ultimately prevail? Only time will tell.