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National Treasury and the South African Revenue Service told Members of Parliament on Thursday that they planned to introduce a raft of relief measures for taxpayers in line with President Cyril Ramaphosa's provisions to protect businesses and employees amidst the coronavirus pandemic.
Treasury officials were speaking to Parliament's Standing Committee on Finance and Select Committee on Finance about the 2020 Draft Disaster Management Tax Relief Bill and the 2020 Draft Disaster Management Tax Relief Administration Bill.
Ramaphosa announced a series of measures on Tuesday, including salary protections, tax relief, tax incentives and other allocations of funds in a historic R500 billion relief package to soften the blow of coronavirus on South African people and the economy.
Ramaphosa was expected to brief South Africa again on Thursday to unpack government's economic response to Covid-19 as well as its "risk adjusted approach" to reopening the economy as it deals with the pandemic, Minister of Finance Tito Mboweni is expected to provide details on the funding mechanisms of these interventions on Friday.
South African Revenue Service group executive for legislative policy, Franz Tomasek, said would consider incentives such as breaks on Pay As You Earn contributions for businesses whose activity was hobbled by Covid-19 and the lockdown.
"Businesses with a gross income of less than R50m will be permitted not to pay total PAYE to SARS from April to July. In May, they only need to pay 80% of PAYE to SARS and you start repaying in September, penalty and interest free," said Tomasek.
Parliamentarians asked sharp questions about the financing and legal basis for Ramaphosa's economic response to Covid-19, to which Momoniat said Mboweni would unpack the finer details in an address on Friday.
On the same morning that Treasury briefed Parliament, it released a statement saying it would introduce Covid-19 interventions, including a deferral for the payment of excise taxes on alcoholic beverages and tobacco products.
"Due to the restrictions on the sale of alcoholic beverages and tobacco products, payments due in May 2020 and June 2020 will be deferred by 90 days for excise compliant businesses to more closely align tax payments through the duty-at-source system with retail sales," the statement said.
The statement also announced a three-month deferral for filing and first payment of carbon tax liabilities to allow time for companies to complete their first return and create cash flow relief in the short term.
The Treasury statement said individuals who received funds from a living annuity will be allowed to either increase or decrease the proportion they receive as annuity income, instead of waiting until their next contract "anniversary date".
The statement repeated other measures already announced by Ramaphosa, including a skills development levy holiday, postponing the implementation of some Budget 2020 measures and increasing the deduction amounts available for donations to the Solidarity Fund.
National Treasury deputy director general for tax and financial sector policy, Ismail Momoniat said while its tax revenue collection projections at the beginning of the year were set to take another knock as a result of the impact of coronavirus on the economy, they could not give specific details on the numbers.
"We won't be able to collect on the projections made in the budget. We don't have the numbers on that, but the president will be addressing the nation on interventions this evening and the minister will deal with the details tomorrow," said Momoniat.
During his Budget Speech in February, before the pandemic hit South African shores, Mboweni already flagged possibly underwhelming revenue targets due to lacklustre growth, with the target at the time standing at R1.422 trillion.
Regarding the draft disaster tax relief bills, Momoniat said the bills have been taken over by events and that National Treasury would have to expedite the legislative process and reassess budget proposals from Mboweni's budget in February.
"In the bills themselves, all the new measures announced by the president this week are not there. The tax incentive is not there. The skills development break is not there. They are not specifically in the bill and the bill will have to be update to take account of these processes," Momoniat said.
Peter Montalto said the global economic community would be paying especially keen attention to Mboweni's announcement on Friday.
"The forum and press conference tomorrow will be closely watched. It’s not clear how much detail you can go into at a press conference, but investors need documents and support to back up these commitments," said Montalto.
Members of the committees said while they understood that the draft relief legislation was an emergency provision, they had misgivings about expediting the legislative process without allowing Parliament enough time and room to pass the bills through due process.
