The Social Relief of Distress (SRD) award may cost R35 billion more as a result of a recent court decision, and the National Budget is quickly coming.
The Bureau for Economic Research (BER) stated that the nation’s attention has now turned from monetary policy to fiscal policy in the wake of the South African Reserve Bank’s recent decision to lower interest rates by 25 basis points.
According to the BER, there are two significant changes on the expenditure front to watch that might significantly increase government spending when the 2025 National Budget is published on February 19.
First off, according to a recent ruling by a high court, the “temporary” SRD award is now a permanent aspect of South Africa’s social assistance system.
The SRD award has never been included in the government’s long-term budget since it was always seen as a short-term solution. Rather, the award is allocated for in that fiscal year and its validity is extended annually.
According to the state, the grant needs special funding mechanisms because it would otherwise be expensive in the budget. Access to the grant has been restricted because of this.
However, the court has now decided that those who are unable to support themselves cannot be excluded because of the grant’s financial viability.
This implies that the number of eligible recipients may increase from the 10.5 million now budgeted for to over 18.3 million this year.
The existing R370 monthly grant would need to be increased by almost R35 billion annually in order to finance this.
The Treasury stated that it is reviewing the decision and may file an appeal.
Wages are the second major expense. In addition to the planned raise, the administration has proposed a 5.5% pay rise for public sector employees.
Along with a few additional enhancements to non-monetary perks, the idea is being examined by the unions.
There is hope that a deal may be achieved before to the Budget, according to the BER.
What else should I watch out for?
According to the National Treasury, a number of important tax proposals are being examined for 2025.
Although they are not definitely upcoming revisions, Treasury is considering the following ideas, which were all received in response to the 2024 mid-term budget (MTBPS):
increasing the quantity of goods that are zero-rated for VAT;
raising the corporate income tax headline rate to 28%;
more robust actions to stop illegal financial flows;
imposing financial transaction taxes and a progressive net wealth tax on wealthy persons;
raising inheritance, estate, and luxury import taxes in addition to raising PIT for high-income individuals;
lowering or eliminating tax benefits for wealthy people in order to reduce tax evasion;
quickening the process of closing current tax gaps;
elimination of tax credits for medical care;
systematic evaluation of tax breaks and elimination of those that don’t work;
a 20% rise in the Health Promotion Levy, followed by yearly increases in line with inflation.
The public does have some influence over the budget, and they can offer suggestions before it is formally delivered on February 19, 2025.
According to the National Treasury, all recommendations and contributions from South Africans are subjected to a screening procedure.
Policymakers get the top choices, and the “winning” one is incorporated into the budget speech.
South Africans have been using the tip system more and more since it was established in 1999 by former Finance Minister Trevor Manuel, with 2023 seeing a particularly high level of participation.
According to Treasury, tips totaled 341 in 2021, 980 in 2022, 2,385 in 2023, and 855 in 2024.
Submissions should be brief, no more than 300 words, and must be made by February 10th, 2025.
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