With last year’s value-added tax (VAT) debacle still fresh in everybody’s mind, today’s budget tabled by Minister of Finance Enoch Godongwana is set to be a “feel better” budget that will promote the GNU effectiveness, an expert says.
It will be an election budget designed not to upset too many people, but to promote the effectiveness of the government of national unity, Daniel Silke, a political economy analyst, said.
Budget aimed at stability and voter confidence
“It will also be to show voters that the country is showing signs of stability and indeed recovery in the economy.
“Maybe there will be some concessions when it comes to living costs, given there will be some improvements in revenue coming through in the budget,” he added.
“Can that be translated into some benefits for ordinary South Africans when it comes to pricing, disposable income?”
Sin tax and fuel levy expected
The country, in addition to the sin tax, must expect another hike in the fuel levy, which the analyst describes as the “cash cow” for the government and an easy target every budget to raise costs.
“That will be one glaring annoyance for most South Africans who rely on transport,” Silke said.
Various stakeholders will scrutinise today’s budget closely to see if it meets their expectations amid the promising economic performance.
Business is satisfied with the government-business partnership focused on growth and investment.
While they are all on the same wavelength on tangible economic growth, a call by trade unions and civil society to tax the rich persists.
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Medical aid tax credit under scrutiny
The tax on medical aid rebate and wealth featured prominently in the civil society debate.
One of organisations, Alternative Information & Development Centre (AIDC), want the medical aid tax concession cancelled to create more jobs for the jobless.
It cited the plight of unemployed graduates, shortage of teachers, health workers and police officers.
The proposal to halt the tax reduction for medical aid members and the rumours that Godongwana or the SA Revenue Service (Sars) is contemplating implementing the idea in future, open another avenue of concern for both medical aid members and the sector, alongside the fear of National Health Insurance’s impact on private care profits.
The tax credit is a fixed monthly rebate, not a percentage of contributions, adjusted annually by Sars.
For the 2026 tax year, it is R364 for the main member, R364 for the first dependant, and R246 for each additional dependent per month.
Tax benefits ‘disproportionately benefit the elite’
AIDC’s senior project coordinator Aliya Chikte told The Citizen there are many tax benefits that disproportionately benefit the elite in South Africa and the medical aid tax credit is just one of these benefits.
“We do not anticipate Sars or National Treasury removing the medical aid tax credit in the upcoming budget. Historically, this government prioritises the interests of the elite over two-thirds of South Africans living in poverty,” Chikte said.
The medical aid tax credit costs the fiscus R30 billion per year, with 40% of this amount going to those earning above R500 000 per year.
“At the same time, the Social Relief of Distress grant is unable to reach half of the qualifying applicants earning less than R624 per month.
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“In the world’s most unequal country, there must be increased pressure on treasury to enhance and maximise the progressivity of the tax system,” Chikte said.
Economic tailwinds and job creation debate
AIDC suggested implementing tax credits instead of tax deductions, which apply to high-income-earning retirees.
It argued the current structure of the retirement contribution tax deduction benefits higher-income taxpayers disproportionately and “therefore contributes to exacerbating inequality”.
“However, the solution is simple: it can be changed from tax deduction to a tax credit.
“AIDC highlighted the difference between the two, noting that while tax deductions are applied against taxable income, tax credits are applied against the taxpayer’s tax liability,” it said.
Silke expects the budget would tout improved stability in the economy, for which the GNU parties would like to take credit.
Other contributory factors were a tax windfall from mining, the rands improvement, the slightly lower interest rates and South Africa’s removal from the greylist.
On the medical tax rebate, the analyst doubted if the halting of medical aid tax reduction would automatically translate into mass job creation.
Medical aid tax versus employment creation could not be the subject of an on-off political gamble as job creation required a host of right policy choices and confidence-building measures.
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