Duties and functions

Tax hikes to watch next week – including higher fuel tax: Nedbank

Nedbank released its preview ahead of Finance Minister Enoch Godongwana’s inaugural budget speech on February 23.

The bank expects a number of tax increases to be announced, although these are likely to be slight compared to previous years due to increased revenue.

“Revenue growth will slow in line with GDP growth from 2022/23. We expect tax collections to decline to 5.8% in 2022/23 and 5.9% on average over 2023/24 and 2024/25.

“We do not expect any material changes to tax rates in the year ahead, with the usual adjustments being implemented.”

Nedbank said the most likely increases include:

  • Inflation-related adjustments to personal income tax brackets and refunds;
  • Increase in general fuel tax below inflation by 30 c/litre for petrol and diesel, and 15 c/litre for the Road Accident Fund tax;
  • Typical above-inflation increases in excise duties on alcohol and tobacco;
  • The corporate tax rate remains unchanged at 28%.

“The rebound in economic growth, more dynamic taxation and a more effective tax authority will support revenue growth over the medium-term expenditure framework (MTEF) period,” the bank said.

“We expect total consolidated revenue to be R404 billion and R656 billion above the Medium Term Fiscal Policy Statement (MTBPS) and budget estimates, respectively, over the MTEF period.”

The finance minister’s first budget speech promises to continue the cautious stance demonstrated in the 2021 MTBPS, Nedbank said. If achieved, the National Treasury will be on track to reduce the budget deficit and slow the pace of debt accumulation.

However, he warned that the government will have to balance high spending needs with slower revenue growth.

“As income growth slows in line with the normalization of economic growth, the fiscal deficit and public debt will remain above median levels for B-rated countries on the MTEF. As a result, South Africa is unlikely to experiences a significant improvement in its credit rating during this period.

Investors will also seek more evidence of the “enabling” business environment promised by President Ramaphosa in this year’s State of the Nation address, Nedbank said.

“In this context, spending needs to be directed towards critical functions, in particular infrastructure spending, which would help ease existing constraints on private investment and job creation.”

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