EY Insights & Comments on Budget 2020

“There is much to welcome in this budget, particularly action on youth unemployment, some fair steps in creating a fair tax system in support for beleaguered state-owned enterprises. This budget clearly acknowledges that the government has a central role to play in turning SA into a competitive economy and that it is willing to do so. This was also a budget for business and a budget for trade. Signalling the corporate tax cut in the future made our tax system more competitive. It means business will be better positioned to grow whilst the economy picks up. It also helps with the broader messaging that SA is open for business. We welcome this budget and believe that it enhances immediate prospects for economic recovery and the economy’s long-term growth prospects. It was a very necessary, credible path to fiscal and monetary balance and we thank the Minister for delivering it.”

– Ekow Eghan, EY’s SA Tax Leader responds to the Ministers Budget Speech from Parliament in Cape Town.

“South African’s will see their personal tax rates drop in each bracket by approximately 5.2% which exceeds the expected inflation rate of 4.4%. But, offset against the fuel levy increases there won’t be much to gain. However, the Minister has spared South Africans from further tax hikes, ultimately leaving him with no option but to tackle inefficiencies and expenditure.”

– Elizabete da Silva; EY PAS Executive Director

“SARS is moving to a final assessment system in payroll which will ultimately mean no tax returns by salary earners. The impact is improved revenue collection as the administration burden on SARS eases and employers become even more compliant.”

– Elizabete da Silva; EY PAS Executive Director

“In an effort to limit corporate tax deductions and profit shifting from South Africa, SARS proposes reducing the deduction of the net interest expense paid to an off-shore entity, as a percentage of taxable income, by 10% (from 40% to 30%).”

– Mark Goulding, EY Global Compliance & Reporting Partner

“A good budget for both individuals and companies. A clear acknowledgement that SA already has a relatively high tax-to-GDP ratio compared with our peers. This means limited scope for additional tax increases which is what was delivered. SA’s corporate tax rate has not changed for more than a decade and at 28% is high compared to our largest trading partners who are on the mid to low 20%’s. Reducing the corporate income tax rate will help to encourage new investment, expand production and assist growth. The budget comments lead us to believe there will be a gradual rate reduction in corporate tax over probably the next 5 years to put us on par with our trading partners.”

– Mark Goulding, EY Global Compliance & Reporting Partner

“A well-balanced budget which provides a bit of relief for taxpayers by focusing on efficiency improvements at SARS and expenditure rather than tax hikes.”

– Mmangaliso Nzimande, EY Africa Tax Controversy Leader

ENDS