The Minister of Finance, Tito Mboweni, delivered the supplementary budget speech on the 24th of June. The need for the supplementary budget address was as a result of the significant effects that the current COVID-19 pandemic has on the economy of South Africa. Whilst there were no tax increases announced, it is clear that if no action is taken to increase revenue and cut expenditure, the lasting effect on the economy as a whole will be devastating.
Mr Mboweni stressed that South Africa’s largest tax bases, namely personal income tax, corporate tax and value-added tax under tremendous pressure due to a slowdown in economic activity, influenced by the initial and then the extended lockdown regulations. This has resulted in revenue collections for the first two months of the fiscal year falling short of budget an estimate of about R35 billion. They are projecting a shortfall in tax revenues of about R300 billion for the 2020/2021 fiscal year.
The Minister noted two major concerns pertaining to the current state of the economy:
As a counter measure to reduce expenditure, the Minister announced the cutting of spending and review of the public sector wage bill. There will also be a focus on increased tax revenues, with specific attention given to improved tax collection and tax administration.
The South African Revenue Services, in a hope to broaden the tax base achieve, will be focussing on the following measures:
The Minister also mentioned amendments to the COVID-19 Loan Guarantee Scheme. To date, the scheme has only distributed R7 billion to 4,800 qualifying small businesses*, which is less than 10% of the available amount. The relaxed terms and conditions and wider qualification criteria should help struggling businesses access funding.
How does this supplementary budget relate to businesses and individuals?