Budget 2022/23: our experts notes and thoughts

Tax Partner, Bernard Sacks gives us his expert analysis and summary of National Treasury's budget 2022/23.


  • Gross tax revenue for 2021/22 is expected to be 23.8 per cent higher than in the previous fiscal year and R 181.9 billion higher than projected in the 2021 Budget. It is also R 62 billion higher than estimated in the October 2021 MTBPS.
  • Gross tax revenue is forecast to reach R 1.55 trillion – a figure higher than pre-pandemic forecasts.
  • The tax-to- GDP ratio is expected to reach 24.7 per cent in 2021/22.
  • The main tax proposals for 2022/23 include personal tax relief – achieved through adjustment in personal income tax brackets and rebates, no increase in the fuel levy or RAF fund levy, increases of between 4.5 per cent and 6.5 per cent in excise duties on tobacco and alcohol products and confirmation of the reduction in the corporate income tax rate to 27 per cent
  • It narrows the budget deficit and stabilises debt.

Gross tax revenue for 2021/22 improved dramatically over the previous fiscal year.

A significant proportion of the enhanced collections are attributable to elevated commodity prices. As a caveat, it was noted that the prices of several key commodities are expected to decline over the next two years – which could lead to a decline in tax collections in this area.

Company income and profits have also proven to be more resilient than expected. Tax collections in this area have also benefited from strong but temporary increases in the prices of exports relative to imports.

The recovery in personal earnings has led to buoyancy in personal income tax collections.

Low interest rates coupled with stronger earnings led to enhanced household consumption, which translated into significantly improved VAT collections. Specific excise duty collections also showed large increases.

The strong revenue performance has allowed Government to provide some welcome fiscal relief:

  • R5.2 billion in tax relief to help support the economic recovery,
  • provide some respite from fuel tax increases
  • boost incentives for youth employment.

The main tax proposals for 2022/23 are:

  • Inflationary relief through a 4.5 per cent adjustment in the personal income tax brackets and rebates.
  • An expansion of the employment tax incentive, through a 50 per cent increase in the maximum monthly value, to R1 500.
  • No change to the general fuel levy or the Road Accident Fund (RAF) levy.
  • Increases of between 4.5 per cent and 6.5 per cent in excise duties on alcohol and tobacco. 


As announced in the 2021 Budget Speech, the corporate income tax rate will be reduced from 28 per cent to 27 per cent - effective for tax years ending on or after 31 March 2023.

Government acknowledges that South Africa’s corporate income tax rate exceeds the Organisation for Economic Cooperation and Development average of 23 per cent. Many countries have reduced their rates over the past 15 years. In contrast, South Africa’s statutory rate has remained at 28 per cent. Given that many countries with strong investment and trading ties to South Africa have significantly lower rates, this provides a strong incentive for tax avoidance

Base‐broadening measures will be implemented to ensure that there is no effect on revenue:

  • South Africa’s interest limitation rules need to be better aligned with OECD/G20  recommendations on base erosion and profit shifting.
  • The offsetting of the balance of assessed losses brought forward will be limited to 80 per cent of taxable income. This means that companies with an assessed loss balance that matches or exceeds their current‐year taxable income will need to pay tax on 20 per cent of their taxable income. The proposal does not increase companies’ tax liability, but ensures tax payments from companies are smoothed over time. Smaller companies more likely to struggle with cash flow will be exempt from the proposed changes.
  • Due to the timing of companies’ provisional tax payments, only about 25 per cent of the full effect of each measure will be felt in 2022/23.
  • It is proposed that these measures take effect for years of assessment ending on or after 31 March 2023.


Following reviews in 2021, including engagement with affected stakeholders, several corporate tax incentives in the Income Tax Act will not be renewed when they reach their sunset date. These include:

 Section 12DA (rolling stock) on 28 February 2022

 Section 12F (airport and port assets) on 28 February 2022

 Section 12O (films), which lapsed on 31 December 2021

 Section 13sept (sale of low‐cost residential units through an interestfree loan) on 28 February 2022.


A modest inflationary adjustment will apply to the value of medical tax credits, which will increase from R332 to R347 for the first two members, and from R224 to R234 for all subsequent members.

The brackets will be adjusted, along with the rebates to provide relief from ‘bracket creep’.

The tax thresholds will increase to R91 250 for persons under 65. For those aged 65 to 74, the threshold will be R141 250 and for those 75 and over it will increase to R157 900.


There would appear to be a growing recognition that the key to sustainable improved tax collections lies not in the increase in tax rates, but in the broadening of the tax base – brought about by the stimulation of growth in the economy:

…as tax increases multiply, they dampen economic growth, reduce investment, slow employment growth and negatively affect revenueraising from other tax instruments by narrowing the tax base. Taxes inevitably distort economic activity as taxpayers change their behaviour.

In the absence of higher economic growth that supports longterm improvements in revenue collection, any proposals to fund permanent additions to public expenditure require careful scrutiny.

It is hoped that this translates into a shift in tax policy and a renewed focus on growing the economy.

Other tax policy comments that caught the eye were:

  • Tax incentives create complexity and preferential treatment for certain taxpayers. In line with the recommendations of the Katz Commission and the Davis Tax Committee, expiring incentives that have not widened social or economic benefits will not be renewed. Government continues to assess existing incentives to enhance transparency and efficiency. Those found to be effective and which create the intended benefits will be retained and, where necessary, redesigned to improve performance.
  • Interest limitation rules will be broadened to include some similar interest items; to adjust the fixed-ratio limitation for net interest expense to 30 per cent of earnings; and to restrict only connected-party interest rather than total interest.


The Minister projects real GDP growth of 2.1 percent in 2022. Over the next three years, GDP growth is expected to average 1.8 per cent.

Though the fiscal outlook has improved, it is subject to significant risks. These include:

• Slowing global and domestic economic growth; Calls for a permanent increase in social protection that exceed available resources.

• Pressures from the public‐service wage bill; and

• Continued requests for financial support from financially distressed state‐owned companies.


The health promotion levy for beverages with more than 4g of sugar content per 100ml will be increased from 2.21c/g to 2.31c/g from 1 April 2022. Consultations will also be initiated to consider lowering the 4g threshold and extending the levy to fruit juices.


 A discussion document will be published in 2022 on a personal income tax regime for remote work.

 A review of the exemption of foreign retirement benefits in domestic tax legislation will be conducted.

 A review of depreciation and investment allowances will take place during 2022/23, followed by the release of a discussion document.

 Government will review the approach to adjusting thresholds for inflation


For the first time, fuel prices in South Africa exceeded R20/l for inland unleaded petrol in December 2021 due to higher crude oil prices and exchange rate depreciation. To support consumers and the economic recovery, no increases will be made to the general fuel levy on petrol and diesel for 2022/23. There will also be no increase in the RAF levy. There will, however, be a 1c/litre increase in the carbon tax levy.


The targeted excise tax burdens for wine, beer and spirits are 11 per cent, 23 per cent and 36  per cent of the weighted average retail price, respectively. Excise duties have increased more than inflation in recent years, resulting in a higher tax incidence. Government proposes to increase excise duties on alcohol by between 4.5 and 6.5 per cent for 2022/23.

The targeted excise tax burden as a percentage of the retail selling price of the most popular brand within each tobacco product category is currently 40 per cent. The consumption of cigars has moved towards more expensive brands, requiring a higher‐than‐inflation increase to maintain the targeted tax burden. Government proposes to increase the excise duty rate by between 5.5 and 6.5 per cent. Review papers on the alcohol and tobacco excise duties policy framework will be released shortly for comment.


Following public consultation, government proposes to apply a flat excise duty rate of at least R2.90/ml to both nicotine and non‐nicotine solutions. The proposal will be included in the 2022 Taxation Laws Amendment Bill for further consultation before being introduced from 1 January 2023.


The first phase of the carbon tax will be extended by three years for the period 1 January 2023 to 31 December 2025. The transitional support measures afforded to companies in the first phase, such as significant tax-free allowances and revenue‐recycling measures, will continue over this period, alongside adjustments outlined below. The main proposals include:

 Extending the energy‐efficiency‐savings tax incentive from 1 January 2023 to 31 December 2025.

 Extending the electricity price neutrality commitment until 31 December 2025. The electricity‐related deduction will be limited to the carbon tax liability of fuel combustion emissions of electricity generators, and will not be offset against the total carbon tax liability.

 Adjusting the threshold for the maximum trade exposure allowance from 30 per cent to 50 per cent from 1 January 2023. Updated sectors and allowances will be published for public consultation.

 Penalising emissions exceeding mandatory carbon budgets. The mandatory carbon budgeting system comes into effect on 1 January 2023, at which time the carbon budget allowance of 5 per cent will fall away. To address concerns about double penalties for companies under the carbon tax and carbon budgets, it is proposed that a higher carbon tax rate of R640 per tonne of carbon dioxide equivalent will apply to greenhouse gas emissions exceeding the carbon budget. These amendments will be legislated once the Climate Change Bill is enacted.


Provisional taxpayers with business interests are required to declare their assets (based on their cost) and liabilities in their tax returns each year. To assist with the detection of non‐compliance or fraud through the existence of unexplained wealth, it is proposed that all provisional taxpayers with

assets above R50 million be required to declare specified assets and liabilities at market values in their 2023 tax returns. The additional information will also help in determining the levels and structure of wealth holdings as recommended by the Davis Tax Committee.


Youth unemployment remains stubbornly high at 56.2 per cent for 20‐ to 29‐year‐olds in the third quarter of 2021. To encourage businesses to employ young people, government proposes an increase of 50 per cent in the value of the employment tax incentive, effective from 1 March 2022. The incentive will increase from a maximum of R1 000 to a maximum of R1 500 per month in the first 12 months and from R500 to a maximum of R750 in the second 12 months of eligibility. Improved targeting of the incentive will be considered to support jobs for long‐term unemployed work seekers, alongside an expansion of the eligibility criteria for qualifying employees to improve the incentive for small businesses.


The debt to GDP ratio remains worryingly high.

There is renewed resolve to manage the debt-to- GDP ratio which, worryingly, remains on an upward trajectory. It is expected to peak at 75.1 per cent in 2024/25.

The high debt levels translate into high debt service costs. Placing these costs (of R301.8 billion) in perspective, they exceed the amount spent on economic development (R 227.1 billion), peace and security (R 220.7 billion), health (R 259.0 billion), basic education (R 282.8 billion) and community development (R 236.3 billion). On average, 20 cents of every rand collected in revenue goes to pay debt‐service costs. This is clearly not a sustainable path.


Permanent social grants have been increased in line with inflation. As announced by the President during his State of the Nation address, the social relief of distress grant was extended by 12 months. The Minister announced that a staggering 46 per cent of South Africans receive one form of social grant or another.  

More than 50 per cent of personal taxes are paid by approximately one per cent of the population. The sustainability of such a ratio is doubtful.


The National Treasury is working on a sustainable solution to deal with Eskom’s debt in a manner that is equitable and fair to all stakeholders. Any solution will be contingent on continued progress to reform South Africa’s electricity sector and Eskom’s own progress on its turnaround plan and its

restructuring. Government expects Eskom to take further steps towards cost containment, conclude the sale of assets and implementation of operational improvements to enhance the reliability of electricity supply. The outcome of this work, which is legally and technically complex, will be announced within the next financial year.