Chapter 8. 2023 Budget Review – Presented on 22 February 2023
As an introduction to the aspects of the 2023 Budget Review that are important for payroll suppliers and employers, it is worth noting the following paragraph in Chapter 4 of Budget 2023 that recognises the SARS revival:
“The South African Revenue Service (SARS) celebrated its 25th anniversary in October 2022.
SARS continues to enhance its service offering as it rebuilds from the period of state capture. Over the past three years it has strengthened revenue collection and worked to ensure that its systems, officials and leadership are capacitated to improve the taxpayer’s experience, increase compliance and generate additional tax revenue.
In November 2022, SARS finalised the reparation process for current and former employees as recommended by the Nugent Commission of Inquiry. It continues to build a tax administration that collects tax receipts in an efficient and fair manner.”
Thankfully for all of us, in recent times revenue collections continue to outperform budget forecasts partly as a result of the improved SARS efficiency, taking pressure off the need to increase taxes.
8.1 2023 Budget Overview
Presented on 22 February 2023 by our relatively new Minister of Finance Enoch Godongwana, the 2023 Budget Review was hard-hitting with the finance minister making it clear that difficult times lie ahead of us.
“This is not an austerity budget,” finance minister Enoch Godongwana assured everyone from the podium at Cape Town City Hall on Wednesday. Instead, he said, it’s a budget in which “tough trade-offs” had to be made.
There is however good news from SARS.
Tax revenue collections for 2022/23 are expected to total R1.7-trillion, exceeding the 2022 Budget estimate by about R94-billion, which means that there are no increases to tax rates this year.
Budget 2023 Snippets
Before getting into the numbers, I have copied some interesting snippets from the budget speech as well as from the financial media. They give a flavour of where we are in economic, tax, and political terms.
1. The growth rate for 2023 is revised downward to 0,9%.
Where Enoch is giving…
2. Tax relief of R13bn to support the clean energy transition and increase electricity supply.
3. Roughly 70% of this is to incentivise companies (R5bn) and individuals (R4bn) to invest in generating electricity from renewables.
4. Fiscal drag is addressed through inflation-related adjustments to the personal income tax tables (R13 bn), the retirement tax tables, and transfer duties.
5. The old age and disability grants increase by R90 on 1 April 2023 and a further R10 on 1 October 2023. The result is a total increase to R2090.
6. The child support grant rises from R480 to R510 on 1 October 2023, while the foster care grant increases from R1070 to R1130 over the same period.
Where Enoch is taking …
7. Excise duties on alcohol and tobacco rise 4.9%.
Where Enoch is leaving things as they are….
8. As in the 2022 Budget, Government proposes no changes to the General Fuel levy or the Road Accident Fund levy
9. No increase to the Health Promotion Levy (formerly the “Sugar Levy”) to allow industry time to recover.
10. The diesel fuel levy refund for manufacturers of foodstuffs is extended until 31 March 2025.
Things are bad and the risks are growing ….
11. Real GDP will fall below SA’s population growth rate for the next two years – to 0.9% in 2023 and 1.5% in 2024. This is due to power cuts, deteriorating rail and ports infrastructure and weaker global economy.
12. Inflation is expected to fall from 6.9% in 2022 to 5.3% this year and 4.9% in 2024.
What’s being done about it……
13. Government will implement ‘urgent measures’ to reduce power cuts including opening electricity supply to the private sector.
14. Several reforms are under way to improve transport sector, specifically freight rail.
Getting closer but a long way from balancing the books….
15. The cost of servicing debt mostly built up during the Zuma spending spree era continue to grow and are projected to rise from the current 18% to almost 20% of revenue by 2026.
16. In aggregate, despite some improvement, SA’s Government is still spending R5 for every R4 collected.
17. Annual debt service costs are now over R340bn – triple what is spent on Police and the Budget’s biggest line item, ahead of Basic Education (R310bn) and Social Grants (R286bn).
18. The Budget Deficit will decline from 4.6% to 4.2% of GDP for this year; with Treasury targeting 3.2% in 2025/26. This is a significant improvement helped by higher tax income due to better commodity prices and compares with projections of 5.1% for 2022; 4.9% for 2023 and 3.3% for 2026.
19. The assumption of R254bn in Eskom debt means total government debt stabilises at 73.6% of GDP in 2025/26, later and at a higher level than previously expected.
Odds and Ends
20. South Africa was ‘Grey listed’ on 23 Feb 2023 …
21. Excise duties on alcohol and tobacco will increase by the expected inflation rate of 4.9 percent:
o A 340ml can of beer or cider will cost 10c more
o A 750ml bottle of wine will be 18c more expensive
o A 750ml bottle of sparkling wine will cost an additional 9c
o A 750ml bottle of spirits will be R3,90 more expensive
o A packet of 20 cigarettes will cost an additional R0,98
o 25 grams of pipe tobacco will cost an extra 33c
o A 23 gram cigar will be R5,47 more expensive
BUT …
o Excise duty on traditional African beer is unchanged at 7.82 c/litre (no increase for at least a decade)
o Excise duty on traditional African beer in powder form is also unchanged at 34,7 c/litre (ditto).
8.3 Tax Rates, History, and Analysis Tables
Table: Contribution to Tax Revenue
TAX REVENUE Feb 2021 Budget Feb 2022 Budget Feb 2023 Budget
SOURCE Billions % Billions % Billions %
Personal Income Tax (PIT) R516,0 37,7% R587,9 36,8% R640,3 35,8
VAT R370,2 27,1% R439,7 27,5% R471,5 26,4
Corporate Income Tax (PIT) R213,1 15,6% R269,9 16,9% R336,1 18,8
Customs & Excise Duties R100,5 7,3% R117,4 7,3% R137,9 7,7
Fuel Levies R83,1 6,0% R89,1 5,6% R90,4 5,0
Other R82,2 6,0% R94,5 5,9% R111,3 6,2
TOTAL R1 365,1 R1 598,5 R1 787,5
Note that the above table shows forecast amounts and percentages for the year ahead as announced in each year’s Budget Review, and not actual figures.
What is very satisfying from the perspective of payroll suppliers is the high percentage of tax revenue (35,6%) that flows through payroll systems as PAYE into the fiscus (the total also includes provisional tax but my understanding is that the major portion of the total amount is PAYE).
Granted that economic circumstances in each year play a role (the Covid-19 year is a good example), but from memory, the Personal Income Tax percentage has never dropped below 34% in the last 20 years or so.
Table 4.6: Estimates of individuals and taxable income, 2023/24
Taxable bracket Registered
individuals Taxable
income Income tax payable
R thousand Number % R billion % R billion %
R0 – R961 7 545 020 – 292.2
R96 – R150 1 528 990 21.5 182.0 6.2 14.9 2.3%
R150 – R250 1 505 950 21.1 292.0 9.9 22.0 3.3%
R250 – R350 1 248 123 17.5 370.1 2.5 48.5 7.4%
R350 – R500 1 233 846 17.3 516.3 17.4 89.5 13.6%
R500 – R750 842 653 11.8 506.4 17.1 113.9 17.3%
R750 – R1 000 354 263 5.0 305.1 10.3 84.3 12.8%
R1 000 – R1 500 244 586 3.4 294.3 9.9 92.8 14.1%
R1 500 + 163 702 2.3 493.6 16.7 193.9 29.4%
Total 7 122 113 100.0 2 959.9 100.0 660.0 100.0%
Grand total 14 667 133 3 252.1 660.0
1. Registered individuals with taxable income below the income-tax threshold
Source: National Treasury
Comparison Table: Tax Rates, Rebates, and Thresholds for 2022/23 and 2023/24
2022/23 2023/24
Taxable income (R) Rates of tax Taxable income (R) Rates of tax
R0 – R226 000 18% of each R1 R0 – R237 100 18% of each R1
R226 001 – R353 100 R40 680 + 26% of the amount above R226 000 R237 101 – R370 500 R42 678 + 26% of the amount above R237 100
R353 101 – R488 700 R73 726 + 31% of the amount above R353 100 R370 501 – R512 800 R77 362 + 31% of the amount above R370 500
R488 701 – R641 400 R115 762 + 36% of the amount above R488 700 R512 801 – R673 000 R121 475 + 36% of the amount above R512 800
R641 401 – R817 600 R170 734 + 39% of the amount above R641 400 R673 001 – R857 900 R179 147 + 39% of the amount above R673 000
R817 601 – R1 731 600 R239 452 + 41% of the amount above R817 600 R857 901 – R1 817 000 R251 258 + 41% of the amount above R857 900
R1 731 601 and above R614 192 + 45% of the amount above R1 731 600 R1 817 001 and above R644 489 + 45% of the amount above R1 817 000
Rebates Rebates
Primary R16 425 Primary R17 235
Secondary R9 000 Secondary R9 444
Tertiary R2 997 Tertiary R3 145
Tax threshold Tax threshold
Below age 65 R91 250 Below age 65 R95 750
Age 65 and over R141 250 Age 65 and over R148 217
Age 75 and over R157 900 Age 75 and over R165 689
National Treasury
Table: Six-year History of Income Tax Rates and Rebates
STATUTORY TAX TABLE 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24
Primary tax rebate – all individuals 14 067 14 220 14 958 15 714 16 425 17 235 4,9%
Secondary tax rebate –65 and over 7 713 7 794 8 199 8 613 9 000 9 444 4,9%
Tertiary tax rebate – 75 and over 2 574 2 601 2 736 2 871 2 997 3 145 4,9%
Tax threshold – under 65 78 150 79 000 83 100 87 300 91 250 95 750 4,9%
Tax threshold – 65 and older 121 000 122 300 128 650 135 150 141 250 148 217 4,9%
Tax threshold – 75 and older 135 300 136 750 143 850 151 100 157 900 165 689 4,9%
Bottom marginal percentage rate 18% 18% 18% 18% 18% 18%
Top tax bracket starts at 1,5 m 1,5 m 1,577 m 1,657 m 1,732 m 1,817 m 4,9%
Top marginal percentage rate 45% 45% 45% 45% 45% 45%
Total Personal Income Tax relief 6,8 bn 0 bn 2 bn 2,2 bn 13,5 bn 15,7 bn
Table: Five-year History of Payroll Limits and Thresholds
GENERAL TAX LIMITS AND RATES 2019/20 2020/21 2021/22 2022/23 2023/24
Medical – Primary tax credit 310 319 332 347 364 4,8%
Medical – Secondary tax credit 209 215 224 234 246 5,1%
Subsistence: RSA (meals & incidentals) 435 452 452 493 522 5,8%
Subsistence: RSA (incidentals only) 134 139 139 152 161 5,9%
‘Day trip’ reimbursements (meals & incidentals) 134 139 139 152 161
Residential Accommodation Abatement 79 000 83 100 87 300 91 250 95 570 4,7%
Personal Service Provider Company 28% 28% 28% 28% 27%
Personal Service Provider Trust 45% 45% 45% 45% 45%
Travel – Cost Scale ceiling 595 000 665 000 665 000 665 000 800 000 20,3%
Travel – Prescribed Rate per km 3,61 3,98 3,82 4,18 4,64 11%
Bursary: Remuneration proxy ceiling 600 000 600 000 600 000 600 000 600 000
Bursary: Relative – Basic Education. 20 000 20 000 20 000 20 000 20 000
Bursary: Relative – Higher Education. 60 000 60 000 60 000 60 000 60 000
Table: SARS ‘Cost Scale’ Table for 2023/24 (effective from 1 March 2023)
Determined Value
of the Vehicle Fixed Cost Fuel Cost Maintenance Cost
(R pa) (c/km) (c/km)
0 – R100 000 R33 760 141,5 43,8
R100 001 – R200 000 R60 329 158,0 54,8
R200 001 – R300 000 R86 958 171,7 60,4
R300 001 – R400 000 R110 554 184,6 65,9
R400 001 – R500 000 R134 150 197,6 77,5
R500 001 – R600 000 R158 856 226,6 91,0
R600 001 – R700 000 R183 611 230,5 102,1
R700 001 – R800 000 R209 685 234,3 113,1
R800 001 and above R209 685 234,3 113,1
Prescribed Rate/km R4,64 / km
Note:
1. The prescribed rate per km includes the Fixed, Fuel, and Maintenance cost elements and represents a fair value for a car of ‘average’ value that travels an ‘average’ number of kilometers per year.
2. It is a safe (no risk) option that employers should consider using when estimating travel allowance amounts and for the calculation of travel reimbursement claims.
3. The prescribed rate for 2023/24 has been increased by 11,0% from R4,18 to R4,64 per kilometer.
4. Employers that prefer not to use the prescribed rate per kilometer, must use the ‘Cost Scale’ table to determine a rate per km that is based on the determined value of the privately-owned vehicle for the estimation of a travel allowance, and for the calculation of a travel reimbursement.
5. On assessment, SARS use the ‘Cost Scale’ table and the kilometers declared in the logbook to determine the ‘cost’ rate per km that will be used to calculate the value of the business travel deduction expense that will reduce income tax.
Table 4.8: Retirement Fund Lump Sum Table (including Severance Benefits)
2022/23 2023/24
Taxable income (R) Rates of tax Taxable income (R) Rates of tax
R0 – R500 000 0% of taxable income R0 – R550 000 0% of taxable income
R500 001 – R700 000 18% of taxable income above R500 000 R550 001 – R770 000 18% of taxable income
R700 001 – R1 050 000 R56 700 + 27% of taxable income above R700 000 R770 001 – R1 155 000 R39 600 + 27% of taxable income above R770 000
R1 050 001 and above R141 750 + 36% of taxable income above R1 050 000 R1 155 001 and above R143 550 + 36% of taxable income above R1 155 000
National Treasury
Table: Retirement Fund Lump Sum [early] Withdrawal Table
2022/23 2023/24
Taxable income (R) Rates of tax Taxable income (R) Rates of tax
R0 – R25 000 0% of taxable income R0 – R27 500 0% of taxable income
R25 001 – R660 000 18% of taxable income above R25 000 R27 501 – R726 000 18% of taxable income above R27 500
R660 001 – R990 000 R114 300 + 27% of taxable income above R660 000 R726 001 – R1 089 000 R125 730 + 27% of taxable income above R726 000
R990 001 and above R203 400 + 36% of taxable income above R990 000 R1 089 001 and above R223 740 + 36% of taxable income above R1 089 000
National Treasury
Table: Social grants
SOCIAL GRANT DESCRIPTION 2019/20 2022/23 2023/24
State Old Age Grant 1 780 1 985 2 085
State Old Age Grant, over 75’s 1 800 2 005 2 105
War Veterans Grant 1 800 2 005 2 105
Disability Grant 1 780 1 985 2 085
Foster Care Grant 1 000 1 070 1 125
Care Dependency Grant 1 780 1 985 2 085
Child Support Grant 425 480 505
Grant-In-Aid 480 505
According to the 2023 Budget:
• 19,6 million people are expected to receive social grants by March 2026
• R36 billion is allocated to the Covid-19 relief of distress grant that has been proposed (at this stage) to be extended to 31 March 2024 to provide eligible beneficiaries with R350 per month.
