BUDGET 2024 | Multinationals to be taxed more

Finance minister Enoch Godongwana has announced that the National Treasury plans to introduce R8bn worth of tax increases in 2026/27 through the introduction of a 15% global minimum corporate tax on multinational corporations.

Godongwana tabled the 2024 budget Speech in parliament on Wednesday afternoon, announcing the tax proposals. He said the proposed tax would target multinationals in line with Organisation for Economic Co-operation and Development and G20 standards.

“Multinational corporations with annual revenue exceeding €750m (R15.2bn) will be subject to an effective tax rate of at least 15%, regardless of where the profits are generated. The proposed reform is expected to yield an addition R8bn in corporate tax revenue in 2026/27,” he said.

The budget comes at a time when South Africa’s budget deficit widens to 6% and political pressure from an election year has a chilling effect on the appetite to cut spending.

The Budget Review said a global minimum corporate tax would “limit the race to the bottom” for effective corporate tax rates for multinational companies as other countries compete to attract income and investment through low tax rates.

“Implementing the minimum tax in South Africa will bolster the corporate tax base. South Africa helped develop tax rules to address base erosion and tax challenges arising from the digitalisation of the economy as a member of the steering group of the OEDC/G20 inclusive framework on base erosion and profit shifting,” the review said.

It also proposed an electric vehicles tax incentive be made available from March 2026, where producers of electric cars can claim 150% of investment spending.

The Budget Review proposes no inflation adjustments to personal income tax and medical tax credits. It also proposes no changes to the general fuel levy or the Road Accident Fund levy, adding that this will allow R4bn in tax relief.

The Budget Review acknowledged that revenue collection deteriorated over the past year due to harsh economic conditions and the winding down of the commodities super cycle, among other things.

“Windfall tax gains from high commodity prices over the last two years have come to an end, leading to a sharp fall in mining tax revenue. For the first 10 months of 2023/24, mining provisional corporate tax collections fell by R39.2bn or 50.4% relative to the same period in 2022/23,” the review said.

The Budget Review said tax revenue for 2023/24 was expected to reach R1.73-trillion, which was R700m more than the 2023 medium-term (three-year) budget estimate.

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