Quick-fix highs help cushion budget lows
This year’s budget won’t cripple you. But it probably won’t help you run faster either. From a consumer perspective, it’s laced with sugar-filled energy drinks: designed to give you an instant boost, but over time the refined carbs start to strain your system.
The short-term “lift” came in Finance Minister Pravin Gordhan’s announcement that there would be no increase in personal income tax this year.
The news kiboshed a broadly anticipated rumour and spells some spare change for most, thanks to a 1.8% rise in the personal tax rebate for many (but not all) income brackets. All other things equal, someone who earns R100 000 a year will now have an extra R20.25 a month.
The income brackets higher than R550 101 will have a lower rebate than last year, and therefore will be liable for more tax.
In the highest income bands, the rebate increase outweighs other adjustments. That means, far from speculation that the wealthy would be hit by steeper taxes, someone who earns R1-million a year will walk away with an extra R155.53 every month, according to PwC tax experts.
“Given these changes, those in the lowest tax bracket will be paying up to 11.8% less tax,” said Barry Knoetze, a partner at PwC Tax.
“Even those with taxable income of R1-million will be paying marginally less tax (0.6%) than what they currently are.”
Rob Cooper, a tax authority at Sage HR & Payroll, said: “An increase to the top tax bracket is politically acceptable and administratively it works like a dream. When it didn’t come, it was a real surprise.”
This news, however, becomes slightly blander in light of “the ever-rising cost of fuel and consumables”, said PwC. In short, the government has only partially adjusted tax burdens to mitigate for inflation.
A second sweetener for the rich came with the special voluntary disclosure programme.
For a period of six months, those who have been harbouring offshore assets illegally may disclose them, avoiding criminal prosecution and most of the usual penalties.
The third piece of sweet news was that the value-added tax rate will remain at 14% – for now at least. This could well be because South Africans are poorer now than they were before.
“Real incomes are contracting ... per person: gross national income in 2012 was R54 486, in 2013 it was R54 266, and in 2014 it was R54 124,” wrote Investec chief economist Annabel Bishop, “not because of inflation, but because economic activity is grinding [more slowly].”
So the battered consumer starts off the financial year with a slight spring in his or her step and a few bucks more in the pocket. But this is where the sugar rush ends and the refined carbs start to catch up. South Africans will fall prey to the myriad small ways that the impossibly tasked Gordhan has devised to make up an extra R18.1?billion in revenue.
First, the fuel levy will be increased by 30 cents a litre. According to Cooper, the hike was expected and is fairly moderate.
But Neil Roets, chief executive of Debt Rescue, says it will have “a major impact not just on motorists but on the economy as a whole, because most goods in this country are transported by road”.
There will be a tyre levy of R2.30 per kilogram of tyre. A host of environmental taxes will be hiked: the incandescent globe tax will climb from R4 to R6 a globe, the plastic bag levy will go from six to eight cents a bag, and motor emissions tariffs will go up. In addition, we’ll see a capital gains tax increase, with the maximum effective tax for individuals rising from 13.7% to 16.4%, and for companies from 18.6% to 22.4%.
And then, for those South Africans who can afford to buy properties costing R10?million or more, transfer duties will climb from 11% to 13%.
Predictably, sin taxes are also up. You’ll pay roughly 6% to 8% more on your imported booze or tobacco, depending on the product.
Lastly, perhaps analogous to all things tax-related, is the proposed tariff on sugary beverages. Gordhan introduced the idea in this week’s budget, but it won’t be instituted before April next year.
So, in the same current “enjoy it now but there are VAT increases on the cards” sentiment, taxpayers have another year to get their sweet on.