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No surprises, we need to tighten our belts

21 February 2019 Jonathan Faurie

As predicted, the 2019 National Budget held no surprises and continued with the narrative that the public will be expected to tighten their belts.

  • Carla Rossouw, Tax Manager at Allan Gray, says that Finance Minister Tito Mboweni’s maiden Budget Speech didn’t deliver any major punches such as 2018’s surprise 1% VAT hike, but instead sought to acknowledge the tough economic situation facing taxpayers and restore confidence in the credibility of the South African Revenue Service (SARS) – Click here to read the full release

  • Denver Keswell, Senior Legal Advisor at Nedgroup Investments, says it is disappointing that this budget has not highlighted any significant attempts to encourage savings. “Disappointingly, there is no mention of any increases to the limits on tax-free investments or incentives to promote retirement fund savings, which seems mismatched to the president’s approach to growth and savings. Another interesting observation is the absence of any notable attempts to further introduce wealth taxes,” he says. Keswell added that South African residents who spend more than 183 days in employment outside the country, will be taxed on foreign employment income of more than R1 million. It has also been proposed that non-deductible provident fund contributions can be used against income received. Some positive news is that the previously suggested taxation of collective investment schemes has been re-looked at and will be re-considered. After reviewing the comments, government has proposed that they will need to work with the industry. This is an encouraging development for the financial industry. Click here to read the full release.
  • Andrew Howard, Head of Sustainable Research at Schroders, shared more detail on the fact that the Carbon Tax Bill will be implemented from 1 June 2019, and added that “Carbon pricing schemes are gathering momentum globally with almost one-quarter of the world’s carbon emissions now facing a financial penalty.” Click here to read the full release.
  • Kenosi Magosha, Head of Client Solutions Savings at Sanlam Personal Finance, touched on a few important points which have to be shared with clients. All South Africans with income above the slightly increased tax threshold will be paying more tax – implying less disposable income - as no inflationary adjustments were made to the tax brackets. There were also no upward adjustments of medical expense tax credits or deductions such as retirement contributions. Lower increases in fuel and RAF levies were proposed. Dividend tax and capital gains tax were left unchanged. There will be a zero-rating of some goods and the much-needed increase, in real terms, of old age, disability, war veterans and care dependency grants, with the increase in foster care grant and child support grant aimed at assisting the young. The first-time homebuyer subsidy is an exciting development and the pilot will be eagerly monitored for its success in getting more people into the property market. Click here to read the full release.
  • Reza Hendrickse, Portfolio Manager at PPS Investments, believes that overall, it was a promising budget, which shows resolve in tackling some of our deep-seated issues. Spending priorities recognise the need for spending on infrastructure and investment as well as education, and away from the state wage bill.Tax revenue was downwardly revised since the MTBPS due to higher than expected VAT refunds, but there is some comfort in the fact that SARS is in the process of reform and that the efficiency of revenue collection should improve going forward. The usual excise duty increases on alcohol and tobacco will apply. The Minister made it clear by stating categorically that national government will not be taking on Eskom’s debt. He likened placing money into Eskom to pouring “water into a sieve” but noted that money is being set aside to support the enterprise in its reconfiguration into three independent units. Interestingly, the Minister reported that members of parliament will not be receiving salary increases this financial year, which should send a positive message to taxpayers. The Minister also laid out plans for non-interest spending of R5.87 trillion over the next three years, mostly on education, but also on health and social development. He also detailed how the budget aligned with the President’s five strategic tasks, aimed at accelerating growth, creating jobs, improving education and the lives of the poor, fighting corruption and strengthening the state in order to address the people’s needs.Click here to read the full release.

 

Editor’s Thoughts:
The Budget Speech definitely gives you a reason to have a conversation or two with your clients. Balance the good and the bad, and make sure your clients feel the added value. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].

 

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