The Supplementary Budget Speech: The tax pain is deferred

On 24 June 2020, the Minister of Finance presented the Supplementary Budget Speech 2020 and tabled an adjustments budget for 2020 (Supplementary Budget Speech). The Supplementary Budget Speech explains that “the historic nature of this pandemic [COVID-19] and economic downturn has made it necessary to table such an adjustment.

25 Jun 2020 3 min read The Supplementary Budget Speech Article

In the Supplementary Budget Review 2020 (Supplementary Budget Review), which details the exact changes to the budget tabled in February 2020, the following significant statement is made regarding the collection of tax revenue: 

“Since the tabling of the 2020 Budget, fallout from the pandemic has caused an unprecedented reduction of the in-year revenue projection. Revenue collection for 2020/21 is now expected to be R304.1 billion lower than the 2020 Budget estimate. Revenue shortfalls include tax relief measures amounting to R26 billion in foregone revenue implemented as part of the COVID-19 relief package. More significantly, the shortfall reflects the expectation that the tax base will temporarily shrink as businesses close and people lose their jobs.”

No increase in taxes for now

In the lead-up to the presentation of the Supplementary Budget Speech, there was speculation as to whether any tax increases would be announced. While we now know that there will be no immediate tax increases, it appears that the tax pain will be felt in the near future. In this regard, the Supplementary Budget Review states the following:

“Following five years of large tax increases, the 2020 Budget did not propose new tax measures. Given the extent of fiscal consolidation now required, however, both expenditure reductions and tax increases are necessary to stabilise debt. The active scenario assumes tax increases of R5 billion in 2021/22, R10 billion in 2022/23, R10 billion in 2023/24 and R15 billion in 2024/25. The 2020 MTBPS will revisit these projections, and the Minister of Finance will announce tax policy proposals in the February 2021 Budget.”

Measures aimed at improved tax collection

An interesting observation made in the Supplementary Budget Review is that “…improved tax collection and administration will be an important element in achieving fiscal stabilisation.” Specifically, it is mentioned that the South African Revenue Service (SARS) will aim to increase tax collection by doing the following:

  • Focusing on international taxes, particularly aggressive tax planning using transfer pricing;
  • Increasing enforcement to eliminate syndicated fraud related to VAT refunds and import valuations;
  • Expanding the use of third-party data to find non-compliant taxpayers; and
  • Improving the collection of debt due to the fiscus, and ensuring that outstanding taxpayer returns are filed and liabilities paid.


While it is positive that no immediate tax increases were announced, it appears that increases will be announced in the February 2021 Budget. It is also interesting that the specific tax collection measures to be taken were mentioned in the Supplementary Budget Review. In relation to transfer pricing, it is well-known that SARS has been conducting more transfer pricing audits in recent years. Regarding the use of third-party data, it will be interesting to see whether SARS starts conducting audits based on information that comes to its attention, pursuant to receiving information on South African taxpayers from other countries, under the Common Reporting Standard (CRS).

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