South Africa’s tax rates,close to their peak: expert

With the 2019 South African general election set for 8 May this year, there is likely to be significant pressure on Treasury to find ways of reassuring the public and maintaining support for the current government.

As such, the upcoming 2019 Budget Speech is expected to contain more populist and political messages than major tax change announcements.

This is according to David French, director of Tax Consulting at Mazars, who said that it is highly unlikely that new taxes or any major tax rate increases will be announced this year.

“In light of the upcoming election, we believe that Treasury could possibly make some announcement aimed at appeasing the general public,” he said.

“What that may be is difficult to guess, but it is likely to be something that could somewhat relieve the tax burden on the general population. At the same time, Treasury will be extremely reluctant to make allowances that could have a noticeable impact on revenue collection.”

A possible example of this would be to raise the inclusion rate for capital gains tax (CGT), said French.

“We are not saying that this is what will happen, but it is something that would appear to be hitting the rich, while in reality would not collect much additional revenue for Treasury.”

Another reason why this year’s Budget Speech will likely not see any major tax announcements is because tax rates are reaching their peak, said French.

“There are no more innovative ways left for Treasury to raise more revenue through taxes. This has been discussed for quite a few years now and it is generally believed that any further increases in the major tax classes could prove counterproductive.”

As a result, French forecasts that Treasury will have to focus on substantially improving the efficiency of the South African Revenue Service (SARS), as well as to plug all of the major revenue holes – such as the unnecessary expenditure at our state-owned entities.

“Any announcements in this regard will be welcomed, and we hope to see the minister take a more severe stance on needless expenditure in the public sector.”

Tax revolt

Concerns have been raised that any move by government to add further taxes to what is considered an already over-taxed populace would push citizens towards tax revolts.

A tax revolt is a political struggle to repeal, limit, or roll back a government-imposed tax.

Western Cape premier, Helen Zille, sparked controversy at the end of January by volunteering to lead a tax revolt in South Africa if the government fails to take action against those implicated in corruption – or if they are again elected into government.

Zille said that there are multiple cases of successful and impactful tax revolts around the world, adding that she will focus on several of these cases in the coming weeks.

“In the 21st Century, there have been over 80 case studies of impactful tax revolts. More than double that in the 20th century. But given that we are only in first fifth of this century, the trend is clearly escalating because it introduces accountability in government,” she said.

Others have argued that tax revolts are already happening in the country – with the refusal of motorists to pay for e-tolls being a prominent example. Other examples include not paying TV Licences, buying illicit cigarettes, or the wealthy moving their money offshore.