JOHANNESBURG, Feb. 11 (Xinhua) -- South Africa's 2025 budget is expected to address high debt service costs and increase taxes on alcohol and tobacco, a South African economist said on Tuesday.

Frank Blackmore, lead economist at KPMG South Africa, made the remarks while announcing the consulting company's key predictions for the upcoming 2025 national budget speech regarding taxation and the economy.

South African Minister of Finance Enoch Godongwana is scheduled to deliver the 2025 national budget speech in parliament on Feb. 19.

Blackmore said taxes on alcohol and tobacco, often referred to as "sin tax," are expected to increase, with no significant changes on the revenue side.

"One of the most important and fastest-growing items in the budget concerns debt service costs, which are larger than all corporate income taxes paid in South Africa and account for about one out of every five tax revenues collected, or 20 percent of revenue spent," Blackmore noted.

According to recent reports, South Africa is currently spending about 1.06 billion rand (about 55 million U.S. dollars) per day on servicing its debt.

"Businesses and rating agencies will be looking at how much money is allocated to infrastructure and economic development. It will be interesting to see what funds have been set aside for infrastructure -- another important factor that President Cyril Ramaphosa highlighted in his State of the Nation Address," he said.

Blackmore said infrastructure typically receives around five percent of the budget, while infrastructure and economic development combined account for about 10 percent. These allocations are expected to increase to support higher economic growth. The budget is also expected to fund the National Health Insurance initiative, which aims to expand universal health coverage.

Joubert Botha, head of tax and legal at KPMG South Africa, said it is expected that Godongwana will not make major changes to the value-added tax (VAT) rate but is likely to add more products to the "zero percent list", a list of goods and services taxed at a rate of 0 percent.

"On corporate tax, we may see adjustments to exemptions, allowances, and incentives," he said.

Botha added that the South African government is likely to provide "more clarity" on the use of medical aid tax credits and whether there will be a cap or reduction in these credits in the future.

According to him, the government will continue focusing on maintaining the tax base while implementing amendments and adjustments to address tax loopholes and transactions that erode revenue.

As for wealth tax, "we are expecting announcements and perhaps even disclosure documents regarding a future wealth tax," Botha added. Enditem

Related

Go to Forum >>0 Comment(s)