Ahead of Finance Minister Tito Mboweni's 2021 Budget Speech later this month, accounting firm Mazars says the National Treasury is unlikely to implemented significant tax hikes.

Mazars tax partner Bernard Sacks told participants in a webinar, held on February 3, that this was traditionally the time tax increases were announced, but that he did not expect significant tax changes to be announced this year, as the economy and people in general were struggling amid the impact of Covid-19 and the related lockdown.

He further said it was unlikely that any new taxes would be announced, save for potentially a vaccine tax to help cover the cost of Covid-19 vaccinations.

Sacks noted that, rather, there could perhaps be small increases in taxes at similar rates seen in the past, as well as the usual increases in sin taxes.

He said it would be wiser for government to stimulate the economy and economic growth, employment and foreign direct investment to increase tax revenue, rather than implementing new taxes or large increases in existing taxes.

Moreover, he suggested that a “bold” strategy that could be pursued would be to restructure and reduce some of the corporate tax, to encourage more corporates to set up shop in the country, which would stimulate growth and employment.

Mazars Taxation national head Mike Teuchert reiterated Sacks' view on tax hikes. He said tax rates would not be changed substantially, but rather, there would be small adjustments of certain rates.

Teuchert said increasing taxes would be done subtly, similarly to the previous two Budgets, by not making any inflation adjustments to tax tables.

He also noted that, while it might be tempting for Mboweni to put in place a one-off tax for the vaccine, this could potentially impact the economy poorly.

In terms of funding the vaccine, Mazars Tax director David French said there was precedence for implementing a one-off tax, citing the transition tax implemented at the advent of democracy.

He noted that this was simple, fairly easy to implement and effective, showing that it could work.  

Nevertheless, he said this may not necessarily be the ideal course of action.  

Sacks, meanwhile, said the financial figures for vaccination were not as considerable as may be perceived.

He explained that about nine-million South Africans were part of medical aid schemes and would have the cost of their vaccinations funded through these, with the prescribed minimum benefit being amended to include vaccination against Covid-19.

Moreover, for every member that will be vaccinated, medical aid schemes might have to fund one non-member, which would cover another nine-million people.

Moreover, Sacks said the Solidarity Fund would be funding about 10% of the country’s population, which would cover about 25-million people, based on population estimates.

Therefore, government would only have to cover the rest, he said, which was about 15-million to 17-million people, to reach the required percentage to be vaccinated to achieve herd immunity.

He, therefore, advised against the implementation of a wealth or vaccine tax to cover that cost.

Meanwhile, while tax revenue would be lower than projections at the start of the 2020/21 financial year, French said December’s figures presented signs of positivity, as these showed a 6% increase year-on-year.

While still below projection, he said revenue collection was higher than the National Treasury had anticipated, "and there looks to be some buoyancy in collections for the coming few months".