The COVID-19 pandemic has had a severe impact on tax revenue collection. Given large predicted shortfalls in revenue for 2020/21 and over the next three years, the 2020 Medium Term Budget Policy Statement (MTBPS) confirmed that tax increases totalling R40 billion would be required over the next four years to help stabilise public debt and return the public finances to a sustainable position. These increases were first announced in the June 2020 special adjustments budget.

Gross tax revenue for 2020/21 is now expected to be 10.6 per cent lower than in the previous fiscal year and R213.2 billion lower than projected in the 2020 Budget due to the pandemic. However, as a result of the recovery in consumption and wages between October and December 2020, and a boost to corporate income tax receipts from the mining sector, 2020/21 revenue collections are expected to be R99.6 billion above the 2020 MTBPS estimate.

COVID-19 has led to many business closures and job losses. To support households, businesses and the economy in the context of relatively high income tax rates, government will not introduce measures to increase tax revenue in the 2021 Budget and previously announced increases over the next three years will be withdrawn.

The main tax proposals are:

  • Tax Revenue
    • Previously announced increases totalling R40 billion over the next four years withdrawn
  • Personal Income tax
    • Income tax brackets and rebates will increase with a percentage above the 4% inflation rate.
  • Excise duties
    • Alcohol and tobacco excise duties increased by 8 per cent for 2021/22.
  • UIF
    • Contribution ceiling increased to R17 711.58 per month from 1stMarch 2021
  • Venture Capital Company Tax Incentive
    • No extension after 30 June 2021
  • Fuel levy
    • Increased by 27c/litre from 7 April 2021
      • 15c/litre increase in general fuel levy
      • 11c/litre in the RAF levy
      • 1c/litre for the carbon tax fuel levy
    • Corporate Income Tax
      • Tax rate will be lowered to 27% for year ends commencing 1st April 2022
    • Plastic bag levy
      • To be reduced to 12,5% per bag: date to be advised

Should you have any queries please do not hesitate to contact us in this regard.