Tributum Newsletter #16

Hello

One of Isaac Newton’s famous laws of motion is that for every action there is an equal and opposite reaction. I believe the same applies to any rights we may enjoy as humans. For every right, there is an equal and opposite obligation.

As example if you have the right to freedom of speech, then you have the obligation to monitor what you say and accept that others can also say what they want. If you have the right to freedom of movement you should not infringe on the movement of others. If you have the right to education, then you have the obligation to attend school, learn and do your best. And so, on and so on. Would the world not be a much better place if we spent the same amount of energy on our obligations as we do on our rights? After all, many a WAR started with We Are Right…

Social science lesson over, let us look at economic news. The supplementary budget presented by Tito Mboweni on 24 June 2020 merely confirmed the bad news:

• Expected economic contraction of 7.2% (global recession estimated at 5.2%);
• Debt to GDP ratio at around 82% and increasing. 21 cents of every Rand of tax fund interest payments;
• Tax collection for the first 2 months down by R35b. Annual shortfall expected around R300bn. This is to be expected with the recession and the COVID-19 payment relief, but its still bad.

The only two good points from the budget are that inflation is estimated at 3%, and there are no immediate tax rate increases. Minister Mboweni has however indicated that an additional R40b in taxes must be collected by 2024. That suggests that some tax increases can be expected over the medium term. What these are will only be highlighted in the February 2021 budget speech.

BUT, that is not unexpected. And it will also not just be South Africa. Globally the Covid-19 economic stimulus packages would have to be funded somehow. Therefore, expect global tax rates to increase as well. Again, in this we is not alone. Also expect tax authorities, including our own SARS, to be more aggressive in their audit approaches.

Individual tax filing season only opens on 1 September 2020. That is a 2-month delay from the past where tax season normally opened on 1 July. Non-provisional tax e-filers have until 16 November 2020 to file their returns and provisional taxpayers until 31 January 2021. Some taxpayer will in fact be automatically assessed by SARS before 1 September 2020 already based on information gained from employers, banks etc.

Please remember that the Covid-19 virus does not follow lockdown regulations. As these are relaxed cases will surge. We have not yet seen the worst. Please follow the rules. It’s not just for yourself, while you may be capable of fighting the virus, those around you may not. Stay safe, stay healthy, until next time.