In the lead up to the Budget, the opinion was widely expressed that if the extent of fruitless and wasteful expenditure in the public sector were addressed, it could go a long way in correcting our country’s budget shortfall. 

An interesting issue raised in the Budget is that Treasury will consider the tax implications arising from fruitless and wasteful expenditure. To ensure proper governance of public entities and encourage accountability, government proposes that losses or expenditure classified as fruitless and wasteful will not qualify for a tax deduction. What remains to be seen is exactly how fruitless and wasteful expenditure will be defined for tax purposes, as no such definition currently exists in the Income Tax Act, No 58 of 1962.