South Africa’s National Assembly (lower house of Parliament) has passed two tax bills that would provide economic relief for those affected by the coronavirus crisis.
The two bills, referred to as the COVID-19 Tax Bill and the COVID-19 Tax Administration Bill, were introduced by Finance Minister Tito Mboweni along with the adjusted 2020 budget on June 24. They will now head to the upper house, the National Council of Provinces, for approval, according to an August 25 release from the Parliament.
The COVID-19 Tax Administration Bill would defer around ZAR 44 billion (about $2.6 billion) in some employers’ taxes in a bid to improve cash flow for small and medium-size businesses. The COVID-19 Tax Bill would provide around ZAR 26 billion in economic relief and increase the limit on annual donations to South Africa’s solidarity fund, which administers disaster aid and relief. Mboweni said in June that the spending laid out in the April 1 draft bills could force the National Treasury to raise taxes.
Speaking during an August 25 parliamentary debate, Mboweni said the Ministry of Finance made several adjustments to the draft bills, including increasing the employment tax incentive to ZAR 750 a month and increasing the amount of Pay As You Earn (PAYE) that can be deferred to 35 percent. Also, companies with incomes of up to ZAR 100 million (previously ZAR 50 million) will be able to apply for PAYE and provisional tax deferrals, he said.
Mboweni also referenced President Cyril Ramaphosa’s April 21 announcement of expanded tax relief measures that include fast-tracking VAT refunds, giving companies a four-month holiday from the skills development levy, and postponing the filing deadline and payment of the phase 1 carbon tax.
“These proposals sought to provide much needed cash flow relief for businesses, to incentivize the retention of lower income employees and increased donations for the fight against the pandemic and to provide assistance for households during this incredibly difficult period,” Mboweni said in his statement. “Even though the tax revenue shortfall is expected to be considerable due to the reduction in economic activity and . . . the provisions in these bills, the tax system is an excellent mechanism to provide the quickest possible boost to cash flows.”
Mboweni addressed criticism that the supplementary budget only enacted ZAR 36 billion of the ZAR 500 billion package announced by Ramaphosa, saying other relief was administered through unemployment insurance, credit guarantees, and the relief contained in the tax bills. He urged legislators to act quickly in passing the relief measures, saying it would be "unwise to wait for too long before providing support to businesses and households."