New and expanded tax measures to help businesses cope with the effects of the coronavirus lockdown — including expanded employee tax incentives and payment delays on upcoming carbon taxes — will cost the fiscus about R26bn in forgone revenue.
The measures are split between steps that provide additional liquidity to businesses — effectively acting as interest-free free loans that will ultimately be paid back to the government — and measures that will result in lower tax revenue, the Treasury said in a statement on Wednesday.
In total tax efforts amount to R70bn and form one leg of the R500bn stimulus package announced by President Cyril Ramaphosa on Tuesday.
Business and households across the country are coming under intense strain as the lockdown — necessary to slow the spread of the coronavirusvirus — is expected to cut economic growth by at least 6.1%.
Since the announcement of an initial package to help tax-compliant businesses with cash flow and incentivise them to retain their employees, economic conditions have worsened, said the Treasury in a statement.
Both the Treasury and Sars “have received a large number of requests for assistance, including requests from large businesses that are also experiencing substantial cash flow difficulty”, it said.
“The National Treasury recognises that the short-term interventions announced in the first fiscal package do not go far enough in assisting businesses or households through the crisis — especially as the lockdown has since been extended.”
The measures include an increase in the expanded employment tax incentive amount. The first set of tax measures, announced at the end of March, provided for a wage subsidy of up to R500 per month for each employee that earns less than R6,500 per month. This amount will be increased to R750 per month at a total cost of about R15bn , the Treasury said.
The first set of tax measures also allowed tax-compliant businesses to defer 20% of their employees’ pay as you earn (PAYE) tax liabilities, until July 31, as well as a portion of their provisional corporate income tax payments. This applied to businesses with turnover of less than R50m.
The proportion of employees’ tax liabilities that can now be deferred will be increased to 35% and the gross income threshold for both deferrals will be increased from R50m to R100m, providing total cash-flow relief of about R31bn with an expected revenue loss of R5bn.
The new measures include a three-month deferral for filing and first payment of carbon tax liabilities, which were due by July 31. This has now been pushed back to October 31 and is expected to provide firms with cash-flow relief of close to R2bn.
The relief measures, intended to provide businesses with liquidity, will inject about R44bn into the economy.
Individuals will also benefit, with a 10% tax deduction for people who donate to the Solidarity Fund, set up to help the wider citizenry support the Covid-19 fight.
Expanded access to living annuity funds, used by many retirees, has also been proposed, to help individuals who either need cash flow immediately or who do not want to be forced to sell due to their investments underperforming.
Other steps include the deferral of payment of excise taxes on alcoholic beverages and tobacco products, as well as a delay in the roll out of corporate tax changes announced in February's budget - such changes to rules governing the use of assessed losses to reduce a firm's taxable income.
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