Tax Relief

Cyril’s tax break will save companies however bankrupt the federal government |

The tax break announced on Sunday evening that President Cyril Ramaphosa announced will help businesses resume trade and create much-needed jobs, but the government will go broke and will be forced to cut other expenses like education. Ramaphosa said the government will postpone PayE Tax (PAYE) for three months to provide additional cash flow for businesses, with an automatic deferral of 35 percent of PAYE liabilities for employers with sales less than $ 100 million Edge. The wage tax relief (ETI), which has been in force since 2014, will also be increased by up to …

The tax break announced on Sunday evening that President Cyril Ramaphosa announced will help businesses resume trade and create much-needed jobs, but the government will go broke and will be forced to cut other expenses like education.

Ramaphosa said the government will postpone PayE Tax (PAYE) for three months to provide additional cash flow for businesses, with an automatic deferral of 35 percent of PAYE liabilities for employers with sales less than $ 100 million Edge.

The Employment Tax Incentive (ETI), which has been in effect since 2014, will also be extended by up to R750 per month for a period of four months to encourage companies to employ workers through a PAYE tax refund.

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Ramaphosa said this will encourage employers to hire and retain employees, especially those in the retail and hospitality sectors who are hardest hit.

A necessary evil with consequences

Prof Jannie Rossouw of Wits Business School says these tax breaks will help small and medium-sized businesses get back on their feet, but will also create cash flow problems for the government because they haven’t raised as much money as they are spending now.

“There will now be less money for other expenses, such as education. Apart from the national debt, the state has nothing. The problem is also that these tax breaks have not yet been priced and we don’t know how much they will cost. “

Rossouw does not expect any immediate changes in the amount of taxes we pay for these tax breaks as it has become a policy that tax rates will not change until February.

Economist Mike Schüssler also welcomed the news of the tax breaks, but emphasized that these were only temporary, but would help companies. What worries him is that less is spent on these breaks than on the disaster relief grant.

“We need companies more because they create jobs. The government has already kicked the can on the street and now they are crushing the can. There must be cuts for that, ”said Schüssler

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Treasury Secretary Tito Mboweni and Treasury Department executives will brief the country on Wednesday of the ongoing support measures for South Africans amid the ongoing economic impact of Covid-19.

He will be unpacking the president’s announcements to defer payment of PAYE taxes as well as defer payment of excise taxes by the alcohol sector for three months to relieve the sector as it rebounds and reinstates the R350 per monthly unemployment benefit until March 2022.

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