THERE was little instant gratification for the average revenue-drained citizen in this year?s national budget, unless you happen to be in the lower tax brackets targeted most strongly for tax relief.
As is usual, taxes on luxuries and vices such as alcohol and tobacco were marginally increased. The petrol price will be increased by 4,5c from April 4. Of the approximately R3,50 a litre one now pays for petrol, about R1,20 will be for various taxes.
The good news for many lies in the R8,3bn worth of tax relief targeted at individuals. You can now earn up to R38_000 a year and remain in the lowest tax bracket at 18%. There is also a reasonable amount of relief for those earning between R80_000 and R200_000.
In 2000/01, you would be paying tax at a rate of 37% if you earned between R60_000 and R70_000 a year. In 2001/02, you?ll be paying at that rate only if you earn between R80_000 and R100_000.
The 40% tax rate moves from the R70 000 to R200 000 bracket, to the R100_000 to R215_000 bracket. And the highest tax rate, 42%, now applies to those earning more than R215_000, rather than those earning more than R200_000.
Ernest Mazansky, national chair and senior tax partner at Grant Thornton Kessel Feinstein, believes the concessions on personal income taxes, which are almost exclusively targeted at lower-income earners, are fair to the historically disadvantaged, who have borne ?an inequitable amount of fiscal drag?. But ?there?s nothing there for the high net-worth individual, the entrepreneurs, the risk-takers.?
If you?re earning R500_000 a year, he points out, your tax burden has been marginally reduced by 1%.
In what is almost a budget ritual, Minister of Finance Trevor Manuel picked out a set of ?loopholes? to be closed this year. The ?loopholes? chosen for blockage this year include the possibility of bringing all company directors into the PAYE tax system.
Mazansky is curious about how they intend to achieve this. He points out that in many private companies owners or directors do not finalise their own salaries until the end of the company?s financial year, when profits are known. It?s impossible before then to determine what salary the company can afford to pay them.
?Other directors, of course, do have fixed contracts and are nothing more than employees. There is merit in the argument that they should be brought into the system. But how do you distinguish between the two??
The amount of interest you can earn without having to pay tax on it has increased by R1000 to R4000 if you are under 65. If you are over 65 you can earn R5000 in interest without being taxed on it.
But this provides very little additional incentive to save to high-income earners. If you were, for example, invested in R150 government bonds, you would receive tax-free interest only on the first R35 000 of that investment.
This implies, he points out, that if for example one was earning R80 000 a year, one could save tax at an average rate of 19% of one?s total income by investing R35 000 of one?s capital at interest, assuming a return of 11,5%.
ZA*NOW:
Budget may prolong bond rally February 22, 2001
South Africans to taste ‘sweet fruit’ February 21, 2001
Budget ?likely to chart growth path? February 21, 2001