BUDGET SPEECH 2025 UNVEILED | FASHIONABLY LATE AND READY TO SHAKE THINGS UP

BUDGET SPEECH 2025: A DETAILED ANALYSIS FOR TAXPAYERS AND BUSINESSES

South Africa’s 2025 Budget Speech presents a strategic plan to stabilize national finances while addressing social needs and driving economic growth. Whether you’re an individual taxpayer, a business owner, a director, or a trustee, the budget decisions will shape your financial landscape in the coming years. This article dives deeper into the key elements of the budget, highlighting their implications and opportunities.

ECONOMIC OUTLOOK AND GROWTH PROJECTIONS

The 2025 budget lays a foundation for long-term economic stability and growth:

• GDP Growth: After a decade of stagnation with GDP growth averaging below 2%, the economy grew by only 0.6% in 2024. Projections indicate an average growth rate of 1.8% over the medium term.
• Inflation Rate: Inflation is expected to remain steady at around 4.4%, creating a stable environment for investment and consumption.
• Debt Stabilization: Government debt is forecasted to stabilize at 76.2% of GDP by 2025/26, reflecting a commitment to fiscal discipline.
• Primary Budget Surplus: The government anticipates a budget primary surplus of 0.9% of GDP in 2025/26, creating room to reduce debt service costs and strengthen fiscal buffers.

TAX POLICY CHANGES AND REVENUE GENERATION

To fund essential services and address spending pressures, the 2025 budget introduces several key tax measures:

• VAT Increase: The VAT rate will increase by 0.5 percentage points in 2025/26 and another 0.5 percentage points in 2026/27, bringing the total rate to 16%. This measure is expected to raise R28 billion in additional revenue for 2025/26 and R14.5 billion in 2026/27.
• Personal Income Tax: There will be no inflationary adjustments to income tax brackets, rebates, or medical tax credits, effectively increasing the tax burden on individuals as inflation pushes earnings into higher tax brackets.
• Corporate Income Tax: No changes are proposed, keeping South Africa’s corporate tax rate higher than many peer countries.
• Fuel Levy: The government has opted not to increase the fuel levy for another year, providing an estimated R4 billion in relief to consumers.

EXPANDED SOCIAL SUPPORT MEASURES

Recognizing the cost-of-living pressures faced by households, the budget introduces several measures to support vulnerable groups:

• Social Grants: Above-inflation increases have been announced:
  • Old age and disability grants rise by R130 to R2,315 per month from April 2025.
  • The child support grant increases by R30 to R560 per month.
  • The foster care grant increases by R70.
• Zero-Rated VAT Items: The list of VAT-exempt items expands to include canned vegetables, dairy liquid blends, and organ meats, lowering the cost of essential food items.

INFRASTRUCTURE INVESTMENT AND DEVELOPMENT

Public infrastructure remains a key driver of economic growth and job creation:

• Total Investment: Over R1 trillion is allocated for public infrastructure over the next three years.
• Sector Allocations:
  • R402 billion for transport and logistics
  • R219.2 billion for energy infrastructure
  • R156.3 billion for water and sanitation
• Public-Private Partnerships (PPPs): From June 2025, new regulations will streamline the PPP process, reducing procedural complexity and encouraging private sector investment.

STRENGTHENING TAX COMPLIANCE AND SARS CAPABILITIES

Efforts to broaden the tax base and improve administrative efficiency are central to the budget’s fiscal strategy:

• SARS Funding: An additional R4 billion is allocated over the medium term to enhance SARS’s capacity for tax collection and enforcement.
• Debt Recovery: By February 2025, SARS reported a significant increase in undisputed debt, indicating billions of Rands owed to the state.
• Non-Compliance Detection: SARS identified 156,000 taxpayers engaged in substantial economic activity who were either unregistered or non-compliant with tax filings.

IMPLICATIONS FOR BUSINESSES AND INVESTORS

Businesses must prepare for both opportunities and challenges presented by the budget:

• Tax Compliance: The intensified focus on enforcement means businesses should prioritize accurate and timely tax submissions to avoid penalties.
• Infrastructure Collaboration: Opportunities for private sector participation in infrastructure development will expand under revised PPP regulations.
• Economic Reforms: Structural reforms under Operation Vulindlela aim to stabilize electricity supply, improve freight logistics, and streamline visa processes, fostering a more conducive business environment.

CONCLUSION

The 2025 Budget Speech outlines a pragmatic and balanced approach to fiscal management, economic growth, and social support. For individuals and businesses alike, understanding these changes is critical for strategic financial planning and long-term success.

DISCLAIMER

Nothing in this article and/or post should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure accuracy, Tax A Sured (Pty) Ltd does not accept any responsibility for consequences of decisions taken based on this article and/or post. It remains your own responsibility to consult the relevant primary resources when taking a decision.