South Africa Budget – “We owe a lot of people a lot of money”
Chairman of Sovereign Trust (South Africa) Limited, Tim Mertens comments on the South Africa Budget delivered today.
The key takeaway on that blunt and ominous statement by the Minister of Finance in his 2021 budget speech is the staggering 213 Billion under collection of tax in 2021 compared to 2020. It is stated as the largest collection shortfall on record and in the context of the trillions owed in debt (5.2Trillion by 2023/2024) it shows the deep financial hole the South African economy is really in.
Through the hope of improved economic growth in 21 /22, this collection figure is anticipated to improve by a meagre 24 Billion in 2021/ 22, presumably on the back of perceived sluggish growth and a slow COVID vaccine response needed to free up and accelerate economic growth.
There is acknowledgment that the beleaguered taxpayer cannot continue to bear the brunt of the deep debt spiral and so there is again renewed focus on the wealthier taxpayer base who are being singled out and are to be monitored more closely. There is nothing new in this. However, there appears to be renewed vigour to obtain and process wealthier taxpayer information and to look at those taxpayers affairs on a wholistic basis, not only on what annual income and gains are disclosed annually in the normal course.
This policy feeds into the wealth tax narrative which is a current fiscal hot potato very unpopular with those HNW and UHNW compliant taxpayers who see little being done in stemming ongoing corruption and indeed blatant challenge by the likes of the past president to what is seen as well documented corruption.
Tax compliance, proper professional planning and the appropriate use of annual allowances are key to navigate through any aggressive changes in tax legislation that may be necessitated sooner than later or in future years.
Please download the SARS Budget Tax Guide 2021 here.