Government has decided once again to leave the general fuel levy and Road Accident Levy Fund unchanged, resulting in tax relief of about R4-billion.

This was announced at the release of Finance Minister Enoch Godongwana’s 2024 Budget on February 21, marking the third consecutive year that this decision has been made, largely as a means of curbing inflation caused by sharply rising fuel prices, which have remained high, with diesel retail prices reaching R27/l in October 2023.

However, the Finance Minister said that the carbon fuel levy will increase to 11c/l for petrol and 14 c/l for diesel, effective from April 3.

To partially offset the foregone R4-billion in tax revenue from the unchanged fuel levy, Godongwana noted that specific excise duties on alcohol and tobacco products will increased.

The current guideline excise tax burdens for wine is 11%, beer 23% and spirits 36% of the weighted average retail price. For tobacco products, the current guideline excise tax is 40% of the retail selling price. These already high excise duties have increased more than inflation in recent years.

Despite this, government wants to increase excise duties on these products by between 6.7% and 7.2% on alcoholic beverages and by between 4.7% and 8.2% on tobacco products.

He pointed out, in particular, that government was tabling an increase of the excise duty on electronic nicotine and non-nicotine delivery systems, known as vapes, to R3.04/ml.  

National Treasury revealed that gross tax revenue for the 2023/24 financial year was expected to come to R1.73-trillion, which is about R56.1-billion lower than expected in the 2023 Budget.

The 2024 Budget Review noted that tax revenue performed better than expected in the 2021/22 and 2022/23 financial years, which was mostly attributable to higher commodity prices. However, over the past year, many of the risks identified by Godongwana in the 2023 Budget Review had materialised, resulting in a decline in tax revenue.

In Godongwana’s 2023 Medium Term Budget Policy Speech, he said that fiscal consolidation would include tax policy measures of R15-billion in the 2024/25 financial year to alleviate immediate fiscal pressure and to support the stabilisation of South Africa’s debt.

However, he noted on February 21 that these measures would mainly affect personal income taxes, with no adjustment of the tax brackets for inflation and medical tax credits.

In addition Godongwana announced that two long-term reforms – the two-pot retirement system reform and the minimum international corporate tax rate – would be implemented in the 2024/25 financial year, which starts on April 1.

Under the new global minimum corporate tax, multinational corporations will be subject to an effective tax rate of at least 15%, regardless of where its profits are located.

Over the next three years, National Treasury expects tax revenue to grow by R401.7-billion, reaching R2.13-trillion in the 2026/27 financial year and a tax to gross domestic product (GDP) ratio of 25.3%.

However, National Treasury warned that an enduring improvement in revenue performance would be contingent on higher GDP growth rates.

Godongwana noted that, while many tax bases remained resilient, underlying vulnerabilities limited the extent to which taxes could be increased sustainably.

The 2024 Budget Review showed that revenue from both corporate income tax and value-added tax was expected to remain subdued owing to low profitability in many sectors and the adjustment costs of new investments in energy generation and storage.

Although recent personal income tax collections outpaced expectations over the past year, National Treasury warned that rate increases could threaten economic growth and prompt negative taxpayer behaviours.