The country’s tax revenue shortfall for 2019/20 stood at R63.3 billion, much higher than the R52.5 billion projected in the 2019 medium term budget policy statements (MTBPS).
This was due to weaker-than-expected 0.3% economic growth and the sluggish employment and wage growth which affected personal income tax collection.
The recession in the first half of 2018 also played a role as dividend tax did not yield results and corporate income tax (CIT) underperformed.
Following the 1% VAT increase implemented in 2018/19, growth in VAT collection has moderated. However, VAT refunds strongly grew, playing a role in lower year-to-date performance.
The number of fraudulent VAT refund claims has also increased, but VAT refunds for the last quarter of the fiscal year are expected to moderate as the South African Revenue Service will refer more claims for audit or criminal investigation.
One ray of hope, however, was that there would be no additional VAT increases as anticipated and predicted by economists and experts.
Alcoholic beverages and tobacco products are expected to increase by 4.4% and 7.5%.
The following sin taxes will kick in:
- Beer – 8 cents per 340ml can
- Unfortified wine – 14 cents per 750ml bottle
- Fortified wine – 23 cents per 750mil bottle
- Sparkling wine – 61 cents per 750ml bottle
- Ciders and alcoholic fruit beverages – 8 cents per 340ml can
- Spirits – R2.89 per 750ml bottle
- Cigarettes – 74 cents per pack of 20
- Cigarette tobacco – 82 cents per 50g
- Pipe tobacco – 40 cents
- Cigars – R6.73 per 23g
Government also intends to tax electronic cigarettes in 2021 to follow global policy makers who are seeking to tax such products due to concerns on health effects. However, government will introduce a new category or tariff subheading for heated tobacco products, to be taxed by 75% of the cigarette excise rate with immediate effect.
Government has proposed that the general fuel levy increase by 16 cents per litre and the Road Accident Fund levy to increase by 9 cents per litre. This will be effective from 1 April 2020.
General fuel levy will rise to R3.70 per litre of petrol and R3.55 per litre of diesel.
Road Accident Fund levy will increase to R2.07 per litre of both petrol and diesel.
Plastic pollution remained a significant problem as 12.7 million tonnes of plastic littering the world’s oceans.
Government intends to raise the plastic bag levy from 12% to 15% per bag from 1 April 2020. A review of the current levy, including a clarification of the tax treatment of compostable bags will be undertaken.
National Treasury will consult on extending the current levy on plastic bags to all single-use plastics used for retail purposes including plastic straws, utensils and packaging. This will be implemented in 2021.