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29 October 2020

South Africa issues 2020 Medium Term Budget Policy Statement: Tax highlights

South Africa’s Minister of Finance delivered the 2020 Medium Term Budget Policy Statement on 28 October 2020.

Key tax highlights from the reading include:

  • No new tax proposals were introduced. The Government continues to project R5 billion (b) of tax increases in 2021/22.
  • The current year’s tax revenue is projected to be R8.7b lower than the June budget estimate. Gross tax revenue will be 17.9% lower than collections in 2019/20 (representing a R312.8b shortfall against the 2020 Budget forecast).
  • Government spending remains too high for the tax base with the 2020 recession partly driving this gap.
  • Improved tax collection and administration continue to be essential to fiscal consolidation. No additional funding was earmarked for the tax administration to rebuild its capacity.
  • The near-term objectives for the tax administration include:
    • Finalizing a tax gap study in December 2020
    • Focusing on international taxes, particularly aggressive transfer pricing
    • Increasing enforcement to eliminate syndicated fraud and tax crimes
    • Continuing to leverage third-party data to identify noncompliant taxpayers
    • Greater compliance enforcement of PAYE (Pay As You Earn) and Value Added Tax
  • There are no changes to the caps previously announced in the June budget for tax revenue increases over the next four years.

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For additional information with respect to this Alert, please contact the following:

Ernst & Young Advisory Services (Pty) Ltd., Business Tax Services, Durban
Ernst & Young Advisory Services (Pty) Ltd., International Tax and Transaction Services, Johannesburg
Ernst & Young Société d’Avocats, Pan African Tax – Transfer Pricing Desk, Paris
Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London
Ernst & Young LLP (United States), Pan African Tax Desk, New York

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Document ID: 2020-6400

 
 

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