Finance minister Enoch Godongwana, who has only been in the position for six months, delivered his first budget speech today, 23 February 2022. And the minister’s budget definitely fits into President Cyril Ramaphosa’s plan to focus on businesses in order to create more job opportunities.
During the budget speech, Godongwana announced some tax relief that will boost investment and consumer spending. This should then help stimulate and recover the economy.
Here’s who will be benefitting from the budget announcements:
After the promise was first made in 2020, Godongwana is finally following through on cutting taxes for companies. This is the first time since 2008 that there will be a reduction in the rate – from 28% to 27% for the year starting on 1 April.
This reduction will cost the government R2.6 billion in revenue for 2022-23 and reduce tax avoidance.
And in another attempt to encourage companies to employ young people, the government will increase an employment tax incentive by 50% to a maximum of R1 500 per month.
The budget has revealed that big emitters such as Sasol and the state-owned Eskom Holdings will be benefiting for longer from tax-free allowances and revenue-recycling measures.
Godongwana has confirmed that the Treasury will be extending the first phase of its carbon tax by three years until December 2025. The carbon price, however, will “rise progressively each year”.
Motorists will feel some relief
For once, car owners and users of public transport can benefit as the Treasury will not be increasing the fuel and Road Accident Fund levies for the first time since 1990.
Due to the rebound in oil prices, fuel prices rose about 40%. This pushed consumer inflation to the highest level in ± 5 years. And since taxes make up a third of what motorists pay when filling their tanks, this is a big relief for everyone.
People who pay personal income levies from “bracket creep” will be shielded, as tax brackets increases in line with the 4.5% inflation. The Treasury is projecting this for the 2022-23 fiscal year and said that the “relief is mainly targeted at people in the middle-income group”.
The government will also be benefiting from this relief as below-inflation adjustments to personal income tax brackets and fuel levies are usually an “easy source of extra revenue for the state“.
During the budget speech, Godongwana confirmed that the monthly social grant payouts to pensioners, military veterans and citizens with disabilities, will increase by 5%. This is a big relief as last year it only increased by 1.6%.
And the child support grant will be rising by 43%.
More than 18 million South Africans rely on these grant payments as their only source of income, so with their income increase, the government is hoping to boost consumer spending. This will then help stimulate the economy.
Here are those who are at a disadvantage from the 2022 budget speech.