Sage webinar gives insights into 2021 budget
Technology plays a central role in keeping up with compliance measures outlined in the budget.
South Africa has one of the world’s highest corporate taxes. So it came as quite a relief when finance minister Tito Mboweni announced in his 2021 budget speech that increases in corporate tax will be postponed for the year.
Sage director of product compliance, Africa & Middle East, Yolandi Esterhuizen said they expected significant tax hikes this year. She was addressing a CFO South Africa hosted webinar detailing insights on the 2021 budget from leaders at the payment solutions company.
All about the budget
“We had a projected loss of about R312-billion, so obviously that made us worried, and we thought there would be definite tax increases all over,” said Yolandi. There was also the expectation that government would raise taxes to pay for vaccines.
Yolandi said the minister had to perform a delicate balancing act:
“We also knew that putting more pressure on individuals and companies would negatively impact our economic growth.”
SARS had also collected R100 billion more than expected in revenue, which helped lessen the pressure on consumers. The minister’s hard stance on keeping the three-year freeze on the public sector wage bill brought more relief into the fold because it will further reduce government spending by R264.9 billion.
“This needs to be executed well; if that is not in place, it will affect the budget and our costs,” said Yolandi. She’ll said she’ll be watching the negotiations around the public sector wage bill closely, because those talks will affect individuals and companies.
Yolandi said the minister’s speech failed to shed light on the National Health Insurance bill. This piece of legislation will drastically affect companies and individuals.
Sage medium business vice president Gerhard Hartman said digitising operations could help companies meet their compliance obligations outlined in the budget. “With any business, you need to pay what is owed to the government, whether it is UIF, Pay As You Earn, or skills levies, and part of that is to make sure that you have the correct systems in place,” said Gerhard.
This year the finance minister also proposed an increase in the maximum contribution towards UIF. “This means that if you earn R20,000 per month, the UIF amount would be R148 per month. The proposal is to increase the maximum contribution, so that will now be R177, which is payable by the employee and employer,” explained Yolandi.
“This will affect the bottom line when you look at institutions with thousands of employees, at R30 per person for 12 months.” She said CFOs need to be au fait with the changes in legislation and how they will affect the company.
The country’s alarming unemployment rate puts significant pressure on the country’s purse. Last year R100 billion was allocated to facilitate the creation of jobs. Yolandi said the minister’s budget speech failed to provide ample feedback on those developments.
“Last year, the target was for 800,000 jobs, and the president’s state of the nation address said that 430,000 of that was supported,” said Yolandi. “More people employed provides more revenue for the country in taxes.”
Embracing tech for compliance
This time last year, South Africa watched as the rest of the world entered lockdown. The first Covid-19 case would only be registered on 5 March 2020. Even though the landscape was uncertain, it seemed imminent that South Africa would follow other countries and enter a nationwide lockdown too. Today we know that forward planning and insights are crucial to surviving in uncertain times.
“Companies that had embraced digital transformation before 2020 were able to adapt better and operate when the national lockdown began,” said Gerhard. Contact businesses and companies still using manual systems, however, were hard hit. “We went into a lockdown, you can’t get into your office, you can’t access normal information you expected to access, and suddenly everything is virtual,” he added.
Gerhard urged companies who’ve been slow to migrate to digital platforms to take small steps towards automation. “Finance leaders must take the lead and put the strategies in place,” he stressed. He cautioned against doing too much too fast, emphasising the importance of including the finance team in the transformation process.
Gerhard also noted the importance of doing proper research and investigations before choosing a technology partner. “It doesn’t help that you go on this transformation journey, and you are not compliant at the end of the day. Compliance is key,” he said. Sage recently launched its cloud-based financial management tool called Sage Intacct. “It’s a new technology that manages the finances end to end, and its value is that it makes life easier,” said Gerhard.
Covid-19 demonstrated that technology is central to the functioning of the economy. “We could not have functioned in the past year if it were not for technology: obviously not for all industries, but that is the world we are moving towards,” said Yolandi. Even the government is looking to invest in digitising certain functions at SARS. “R3 billion rand was allocated to Sars to upgrade their technology, to pick up certain trends and to get data from third parties,” she said.
Work from home relief a possibility
Another provision tabled in the budget is possible tax relief for home offices. Yolandi said the current guidelines on home offices are quite specific. “For example, a home office cannot be your dining room, but we all don’t have the luxury of separate office space in our homes.” She says government will have to relook the tax treatments of home offices now that everyone has had to switch to remote working.
Gerhard emphasised that while remote working had in some instances increased productivity, it has also led to varying burnout levels because people are working longer hours at home now that information and operations are instantaneous. “Again, finance leaders must set an example here. Make the time for family, and shut down from work. It is essential to have that balance,” said Gerhard.