The Treasury is on track to collect the R5bn it estimated would be generated this fiscal year from the two-pot retirement system withdrawals.
The SA Revenue Service (Sars) reported on October 11 — about six weeks after the two-pot system came into effect on September 1 — that R21.4bn had already been paid out to more than 1-million applicants. Tax will be imposed at the marginal tax rate and, assuming at a minimum a marginal tax rate of 18%, a minimum tax revenue of R3.85bn has been generated with more than four months remaining before the end of the tax year. The actual amount is probably higher than this.
This bodes well for the revenue estimate that the Treasury will provide when finance minister Enoch Godongwana tables the medium-term budget policy statement in parliament at the end of October. In addition to their tax benefit, the withdrawals are also expected to elevate consumer spending.
The extended break from load-shedding for more than 200 days will have had a beneficial effect on economic activity, leading to a more favourable tax outcome for the year.
The two-pot system was never envisaged as a tax-enhancing measure but was devised as a way to ease financial pressures on individuals by giving them partial access to their retirement savings while preserving the bulk of them for retirement.
While Cosatu has strongly objected to what it terms the onerous tax implications of the withdrawals, any boost to tax revenue will enhance the government’s capacity to deliver essential services in a financially constrained environment.
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