Relief at government’s decision not to hike taxes, tempered by the daunting challenge of keeping state-owned enterprises like SAA and Eskom afloat, as well as the impact of the Coronavirus outbreak were key themes to emerge from a post-Budget breakfast dialogue hosted by Deloitte KwaZulu-Natal on 3 March 2020.
Guests attending the annual event, held at the professional services firm’s La Lucia Ridge offices, also heard how digitisation efforts by the South African Revenue Service (Sars) could pave the way for a time when tax information was collected and the amounts owed calculated automatically with no need for annual returns.
Deloitte KZN Office Managing Partner Ruwayda Redfearn set the scene by referring to a potted aloe featured prominently on the stage, emulating Finance Minister Tito Mboweni’s example when opening his Budget speech.
“The aloe thrives when times are tough. It needs less water, qualities we’ll all need in the months ahead,” she said.
Mark Freer, Director Deloitte Africa Tax and Legal, unpacked the key taxation elements of the Budget. “There was a huge collective sigh of relief that the widely predicted tax increases failed to materialise, but there are still some major concerns. While attempts are being made to strengthen Sars, the R63bn collection deficit is worse than that predicted in the Mid-term Budget Statement and tax revenue growth is barely keeping pace with inflation,” he said.
On the positive side, Freer said he was impressed with Sars’ digitisation efforts, and that a smartphone app and chatbot tied into its eFiling system, along with efforts by the revenue authority to populate returns with more third party data, could pave the way to a day when “tax just happens” automatically without the need for annual returns.
Commenting on the Coronavirus outbreak, Isaac Matshego, a Group Economist at Nedbank, said it was too early to predict its impact on the South African economy, but that these would almost certainly be significant. “As China is our chief trading partner, the virus will certainly have negative effects on supply chains, minerals exporters and miners,” he said.
Political analyst Judith February said the Finance Minister’s ability to achieve tough goals like cutting the public sector wage bill by R160bn and bringing alternative power sources online would prove key tests of his and President Cyril Ramaphosa’s ability to stand up to regressive elements within their own party. On the challenge to provide a stable power supply, February singled out Mineral Resources and Energy Minister Gwede Mantashe, who is also the ANC’s national Chairperson.
“In both these respects, Mr Mantashe could be a major stumbling block. He is seemingly addicted to coal and complicating a move to a more sustainable energy mix is that Mantashe is a union man through-and-through. We’re in for an interesting power struggle over the coming months,” she said.
Sisa Ntlango,Director of Deloitte’s Risk Advisory Business then chaired a panel discussion, with speakers answering questions from the floor on matters ranging from the ‘Sugar Tax’ and the phasing out of tax incentives to the impact on the economy of illegal immigration and the billions looted from state coffers.
Commenting on the impact of the tax on sugar-sweetened beverages, Freer said that when conceived it was intended to target makers of sugary beverages“As it turns out, the beverage makers have been less affected that initially thought due to reformulation and reduction in pack sizes. The biggest impact appears to be on the sugar millers and growers,” he said, adding that the tax netted a relatively small R2bn to R3bn annually.
Answering a question regarding government’s intention to restrict the tax incentives for the Special Economic Zones (SEZs), Freer said, “Fortunately, both KwaZulu-Natal’s SEZs – Dube TradePort and Richards Bay Industrial Development Zone – have already been approved, so won’t be affected by the moratorium”.
In her closing remarks, February also alluded to the aloe. “The key to its survival in harsh times is that it’s an unsentimental plant and ruthlessly sheds dead weight. The million-dollar question is whether our government can emulate the humble aloe’s example and shed the dead weight required to turn our economy around,” she said.
The event was held before the release of data indicating that the SA economy entered a technical recession in the second half of 2019.