Finance Minister Enoch Godongwana will table his first national budget next Wednesday (February 23).
Though it’s an unusual year in many ways – due to the fire in parliament, the budget speech will be presented in the National Assembly for the first time – we can expect continuity between Godongwana and his predecessor, Tito Mboweni.
Here are four things I’m looking out for:
1. Refreshed regulations on home office and travel allowances
With the shift towards working from home becoming permanent for many employees, now is the time to take a closer look at the tax treatment of home office expenses.
Many employees have had to incur additional costs to enable them to work from home, and not all employers are compensating them for these expenses. The requirements for claiming these expenses are stringent.
In particular, it seems unfair that you need a dedicated area in your house used exclusively for work to claim a portion of your rent and utilities as a work-from-home tax deduction.
I was pleased to see a commitment from National Treasury in the 2021 budget speech review document to open consultations around this matter and welcome proposals to ease the burden for home workers.
2. Cut in the corporate income tax rate
In the 2021 budget speech, the former finance minister announced that the corporate income tax rate would be reduced by one percentage point to 27% for companies with a year of assessment commencing on or after 1 April 2022. To offset the loss to the fiscus, Treasury proposed broadening the tax base by limiting interest deductions and assessed losses. Godongwana didn’t mention this change in his medium-term budget speech, so I’m curious to see if it is still on the agenda.
3. Income tax rates to remain steady
Last year, Mboweni increased tax brackets by 5%, which was more than inflation, providing some relief to taxpayers. This was welcome news, given most households’ financial pressures during the pandemic. We may not see such a generous tax bracket adjustment this year, but I’d be surprised to see an increase in personal income tax. Government remains committed to reducing the fiscal deficit by limiting spending, reprioritising, and reviewing existing programmes. It also benefitted from higher-than-expected revenue collection in the previous tax year.
4. More action on unemployment and social support
Unemployment is still one of the biggest challenges in South Africa, and can only be solved with sustainable economic growth. Government has tried to tackle this crisis by earmarking more funding for the presidential youth employment initiative in the 2021 budget and by expanding the Employment Tax Incentive. Even so, the unemployment rate increased to 34.9%.
Government needs to tackle unemployment through a dual-pronged strategy: incentivising and supporting job creation while providing financial relief for the unemployed.
The medium-term budget speech indicated that government might provide additional resources for social relief if the fiscal situation improves by February 2022.
It also noted that a decision would be announced regarding the presidential youth employment initiative. I’m hoping we will see bold action on this front.
Yolandi Esterhuizen is a registered tax practitioner and director of product compliance at Sage Africa & Middle East.