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IOL News
12 hours ago
- Business
- IOL News
Reserve Bank's interest rate cut: response to low inflation and economic challenges
The South African Reserve Bank has lowered interest rates in response to a low inflation rate, but experts warn that rising taxes could still burden households. This article explores the implications of the rate cut and the ongoing economic challenges facing South Africa." Image: File The low inflation rate was the driver behind the South African Reserve Bank (Sarb) Governor Lesetja Kganyago lowering interest rates this past week. Kganyago announced that the central bank's Monetary Policy Committee (MPC) voted to decrease the repo rate from 7.50% to 7.25%. This means that the prime lending rate in South Africa has been lowered from 11% to 10.75%. Frank Blackmore, Lead Economist at KPMG told Business Report that the reason for this was the low inflation rate. Blackmore said, "The Reserve Bank remains data dependent in that respect, as well as the easing of some of the risks such as the exchange rate. Appreciation from the highs over R19, back down to around R18 to the dollar level and as well as the oil prices, which have remained low at this point. They have also taken into consideration that the Value Added Tax (VAT) hike will not take place, also eases future inflation in that respect." "An interesting analysis was also done by the MPC regarding an upside risk scenario if things worked in the other direction and South Africa would face a kind of stagflation scenario including weak economic growth and tight monetary policy reacting to higher levels of inflation, all caused by perhaps, the trade wars that are currently ongoing globally. Probably more interestingly another scenario where they're reducing the target rate from a current 4 1/2% objective, so the midpoint of the three to 6% range to the 3% objective so the bottom of their three to 6% range. This puts us closer in line with many of our trade partners as well as being closer to the median emerging market rate of around 3%," the economist said. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ Ad Loading "In this situation, the benefits would also fall to all South Africans meaning that lower inflation would preserve the value of the earnings and wealth in future periods. Given the low inflation that we are currently experiencing this would be the right time to institute such a change," Blackmore further added. Neil Roets, CEO of Debt Rescue, told Business Report that the announcement of a BPS cut to the repo rate may be good news for economists, but will not shield South Africans from the burden of the fuel and sin tax levies that have been introduced by Finance Minister Enoch Godongwana within his Budget 3.0 projection. Roets warned that increased taxing of the workforce is not the answer, referring to the fuel-tax levy and raising sin taxes even higher, and will put further financial strain on households, driving them to new depths of despair. "This, at a time when they are buckling under the weight of multiple unsustainable inflation-related living costs. The reality is that the Finance minister's decision to impose new tax measures will hurt lower-income families most, as they will bear a proportionally higher burden, thus forcing them to make impossible lifestyle choices with the little disposable income they have left,' Roets said. Roets said that Kganyago is a longstanding advocate of shifting to a lower inflation target, arguing this would make the nation better placed to compete with its trading partners. 'A single-point target of 3% would be in line with South Africa's peers and lead to lower interest rates in the long term,' he has previously said. "His critics worry that reaching a lower inflation target would require tighter monetary policy however, that would cost growth and employment in a country with one of the highest jobless and poverty rates on earth. The Governor reiterated his view saying that the MPC is of the view that the 3% scenario is more attractive than the 4.5% baseline, and they would like to see inflation expectations move lower, towards the bottom end of their target range. He also said the MPC will consider scenarios with a 3% objective at future meetings," Roets said. A lower inflation target risks scuppering further interest rate cuts this year too, Investec Chief Economist, Annabel Bishop warned Bishop said, 'With a change to the inflation target reportedly occurring soon this year, the Sarb has chosen to cut interest rates this month to avoid the limitation of doing so in the future, but then could easily be at risk of needing to reverse the cut.' 'The reality is that the slow pace of the country's repo rate reductions is perpetuating the debt trap that millions of ordinary South Africans find themselves in, leaving millions with no option but to survive on credit,' Roets further said.
News24
2 days ago
- Business
- News24
A VAT crash course, courtesy of 9 000 gold coins
A recent Tax Court judgment stands as a cautionary tale, write Megan Langton and Mornay Bornmann. • For more financial news, go to the News24 Business front page. South African Revenue Service (SARS) Commissioner Edward Kieswetter has spelled it out again after the May 2025 Budget Speech: SARS is committed to collecting significantly more tax this year. He warned that SARS will use all legal instruments to address non-compliance. Despite best efforts to educate and forewarn South Africans, there are still taxpayers and their advisors who make very expensive mistakes when challenging SARS. For delinquent taxpayers who take the risk, the reality is that this Commissioner is not making idle threats. The recent Tax Court judgment in Southern Africa versus SARS stands as a cautionary tale. The taxpayer lost its claim for a R26.9 million input VAT refund. This matter relates to 9 000 gold coins, weighing 358 kg and a customs value of R157 million, brought into South Africa. The taxpayer is a clearing agent operating on behalf of a third party (BIV). The judgment reads that both the taxpayer and BIV 'were under the mistaken impression that no importation VAT was payable on the importation of the coins'. The taxpayer did not initially declare VAT on the import of the gold coins, which entered through OR Tambo International Airport from the UK. SARS informed the taxpayer that gold coins are not exempt from VAT and that a Voucher of Correction (VOC) was needed to bring VAT into account. The taxpayer then passed a VOC to declare VAT, which SARS accepted. SARS later deducted R26.9 million in VAT from the taxpayer's deferment account. The matter was further complicated when the gold coins were subsequently exported back to the UK. However, SARS refused to accept a second VOC, intended to retrospectively cancel the original customs declaration on which the VAT was paid. The court was not impressed Failing to convince SARS to issue a refund of the import VAT, the taxpayer took their plethora of arguments to the Tax Court. This included claims that: The taxpayer qualified as a representative taxpayer or responsible third party entitled to the refund under sections 154 and 158 of the Tax Administration Act; No valid importation had occurred because the goods were later exported; and The taxpayer was entitled to an output tax adjustment under section 21 of the VAT Act. The presiding officer was Judge J Bam of the High Court, Gauteng Division. In a well-written judgment, the taxpayer's arguments were squashed, with the Court stating: Through the life of this case, the Commissioner has consistently informed the applicant of its position. The Commissioner cannot be forced to make a refund of VAT contrary to the provisions of the VAT Act. The Judge agreed with SARS's rejection of the refund on the basis that the taxpayer was not the lawful importer. This was because it was BIV, not the taxpayer, who was reflected as the importer according to all supporting documentation, the VAT registration number, and the accompanying import forms. In one of the most damning lines of the judgment, the Court concluded: The appellant has no case against the respondent. It never had. The taxpayer was ordered to pay SARS's legal costs, including the costs of two counsel. Applying for a simple VAT ruling from SARS prior to import would have clarified whether the agent could claim input VAT, and under what circumstances. The taxpayer and BIV could have imported the gold coins with no VAT risk. What is quite striking is not how the case failed, but how easily it could have been avoided. Megan Langton is a tax attorney at Tax Consulting South Africa, and Mornay Bornmann, attorney for cross-border taxation at Tax Consulting South Africa. News24 encourages freedom of speech and the expression of diverse views. The views of columnists published on News24 are therefore their own and do not necessarily represent the views of News24.
Business Recorder
3 days ago
- Business
- Business Recorder
Solar panels: Pakistan govt mulling withdrawing ST exemption
ISLAMABAD: Chairman Federal Board of Revenue (FBR) Rashid Mahmood said Thursday that the government is examining a proposal to withdraw sales tax exemption on solar panels in budget (2025-26). FBR Chairman was responding to a query of a member of the Senate Standing Committee on Finance during meeting held at the Parliament House. He stated that the FBR is working on proposals to withdraw all kinds of tax exemption including exemption available on the import of solar panels. Cabinet halts additional tax on solar power users Meanwhile, during another meeting of the National Assembly Standing Committee on Finance, the representatives of Refineries briefed the committee that their input was taxed, but on output, there was no GST, causing problems over the last several years. Without resolving this issue, they would not be able to invest $6 billion. The Chairman FBR, Rashid Mahmood Langrial, said that their business came out of the ambit of the Value Added Tax (VAT) when there was no tax on their output. He said that there were proposals under consideration to impose sales tax on their output or provide them some kind of other permanent solutions. Chairman FBR has also assured the committee that he will inquire into the matter of recovering over Rs 80 million amounts from KababJee restaurant Karachi. Member of committee Mirza Ikhtiar Baig raised the issue before the finance committee chaired by Nafeesa Shah. He informed that FBR has recovered more than Rs 80 million from accounts of this restaurant without giving any chance of hearing in different forums. He has no money to pay salaried and owner of the restaurant has threatened to commit suicide. The business community is pressing me for this harassment by the FBR, Baig added. The FBR Chairman replied that I did not have knowledge of this particular case. I will update the committee after inquiring about the matter from the relevant field office of FBR. The committee considered 'The Income Tax (Second Amendment) Bill, 2025'. The Committee expressed concern over the second proviso of the newly inserted clause (3A). The Secretary Revenue assured the Committee that the concerns of the Hon. Members would be addressed and that the words 'and shall cease to have effect after tax year 2025' would be deleted. Upon the assurance given by the Secretary Revenue, the Committee recommended that the Bill, as amended, may be passed by the Assembly. The Committee considered Starred Question No. 38, moved by Aliya Kamran, MNA, regarding the imposition of Section 99D of the Income Tax Ordinance, 2001, and Starred Question No. 40, moved by Sharmila Sahiba Faruqui Hashaam, MNA, regarding the recent policy shift prioritizing digital currencies, without adequately addressing their regulatory deficiencies. After a detailed discussion the Committee decided to defer both agenda items for discussion in the next meeting of the Committee. The report on the 'non-implementation of minimum wages, as announced by the Federal Government in its departments', a matter raised by Syed Rafiullah, MNA and referred by the Honourable Speaker, was also deferred due to the absence of the mover. Copyright Business Recorder, 2025
Business Recorder
3 days ago
- Business
- Business Recorder
Solar panels: Govt mulling withdrawing ST exemption
ISLAMABAD: Chairman Federal Board of Revenue (FBR) Rashid Mahmood said Thursday that the government is examining a proposal to withdraw sales tax exemption on solar panels in budget (2025-26). FBR Chairman was responding to a query of a member of the Senate Standing Committee on Finance during meeting held at the Parliament House. He stated that the FBR is working on proposals to withdraw all kinds of tax exemption including exemption available on the import of solar panels. Cabinet halts additional tax on solar power users Meanwhile, during another meeting of the National Assembly Standing Committee on Finance, the representatives of Refineries briefed the committee that their input was taxed, but on output, there was no GST, causing problems over the last several years. Without resolving this issue, they would not be able to invest $6 billion. The Chairman FBR, Rashid Mahmood Langrial, said that their business came out of the ambit of the Value Added Tax (VAT) when there was no tax on their output. He said that there were proposals under consideration to impose sales tax on their output or provide them some kind of other permanent solutions. Chairman FBR has also assured the committee that he will inquire into the matter of recovering over Rs 80 million amounts from KababJee restaurant Karachi. Member of committee Mirza Ikhtiar Baig raised the issue before the finance committee chaired by Nafeesa Shah. He informed that FBR has recovered more than Rs 80 million from accounts of this restaurant without giving any chance of hearing in different forums. He has no money to pay salaried and owner of the restaurant has threatened to commit suicide. The business community is pressing me for this harassment by the FBR, Baig added. The FBR Chairman replied that I did not have knowledge of this particular case. I will update the committee after inquiring about the matter from the relevant field office of FBR. The committee considered 'The Income Tax (Second Amendment) Bill, 2025'. The Committee expressed concern over the second proviso of the newly inserted clause (3A). The Secretary Revenue assured the Committee that the concerns of the Hon. Members would be addressed and that the words 'and shall cease to have effect after tax year 2025' would be deleted. Upon the assurance given by the Secretary Revenue, the Committee recommended that the Bill, as amended, may be passed by the Assembly. The Committee considered Starred Question No. 38, moved by Aliya Kamran, MNA, regarding the imposition of Section 99D of the Income Tax Ordinance, 2001, and Starred Question No. 40, moved by Sharmila Sahiba Faruqui Hashaam, MNA, regarding the recent policy shift prioritizing digital currencies, without adequately addressing their regulatory deficiencies. After a detailed discussion the Committee decided to defer both agenda items for discussion in the next meeting of the Committee. The report on the 'non-implementation of minimum wages, as announced by the Federal Government in its departments', a matter raised by Syed Rafiullah, MNA and referred by the Honourable Speaker, was also deferred due to the absence of the mover. Copyright Business Recorder, 2025
IOL News
5 days ago
- Business
- IOL News
EFF threatens court action over proposed fuel levy increase
EFF treasurer-general Omphile Maotwe has written to Finance Minister Enoch Godogwana rejecting the fuel levy. Image: Nhlanhla Phillips / Independent Newspapers The EFF has written to Finance Minister Enoch Godongwana, with an ultimatum, demanding the withdrawal of the proposed fuel levy increase, citing constitutional and legislative obligations or face more court action. The party argues that the increase, effective June 4, 2025, is a regressive tax that will disproportionately affect the working class and poor. Godongwana was given 48 hours to respond to the Red Berets' demands, or risk further escalation of the Budget crisis. Godongwana's spokesperson, Mfuneko Toyana, declined to comment on the matter; however, confirmed that the department had received the letter. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ The Budget is, however, yet to be passed in the National Assembly. The EFF's letter comes amid the ongoing drama surrounding the 2025 Budget. The party, with the help of the Government of National Unity (GNU) aligned DA, had previously successfully challenged the Value-Added Tax (VAT) increase in court, which was declared invalid and withdrawn. However, the National Treasury has now proposed to increase the general fuel levy by 16 cents per litre on petrol and 15 cents per litre on diesel, as outlined in the May 2025 Budget Review. In a lengthy letter penned by party treasurer-general, Omphile Maotwe, the EFF argues that the fuel levy increase will have a devastating impact on the working class and poor, exacerbating the cost-of-living crisis and placing undue pressure on households already struggling with rising food and transport prices, stagnating incomes, and unemployment. "The proposed fuel levy increases, though seemingly modest in nominal terms, will have disproportionate effects on the working class and poor, as they cascade through transport, food, and essential goods pricing," Maotwe wrote. The EFF also argues that the fuel levy increase is unconstitutional, as it seeks to impose a national tax through executive regulation rather than through a legislative process governed by the Constitution and relevant statutes. "The fuel levy is a national tax, paid by every South African, directly or indirectly. It cannot be increased through a Government Gazette notice or regulation," the party said. The EFF has formally requested that the minister withdraw the proposed increase. The party has also demanded that the minister refrain from issuing any Gazette or regulatory notice under the Customs and Excise Act until this tax measure has been lawfully processed via a Money Bill.
