There is good news for South Africans this Budget day in the form of small, personal income tax cuts and decreases in transfer duties on houses, but there is also bad news, including further hikes in so-called sin taxes.
Finance Minister Trevor Manuel announced a reduction of R4-billion in personal income tax, which will see those under 65, who earns R32 222 or less, paying no income tax. An individual who earns R50 000 or less will now pay an average rate of six percent of their earnings in tax, and save R400 a year.
A worker who earns R80 000 will save R680 a year. People in this bracket will pay tax equal to an average rate of 11% of their earnings. People who earn R300 000 will save R2 430.
Buying a home will become a little less expensive with a reduction in transfer duty. From March 1, there will be no transfer duty on a property up to R150 000. The transfer duty on a home costing R300 000 will be R7 500. This is R500 less than previously.
The annual exemption on interest income for people younger than 65 has been raised, from R10 000 to R11 000. The exemption for those 65 and older has been raised from R15 000 to R16 000.
This means a 40-year-old person who invests R150 000 in a savings account at seven percent interest per annum will not be taxed on the interest income of R10 500.
Excise duties on CDs, DVDs, certain cosmetic products, print film, watches, clocks, printers and photo-copiers, have been abolished.
However, people will have to pay more for alcohol and tobacco.
Manuel also announced increases in so-called sin taxes that will raise an additional R1,4-billion for government coffers.
The increases will see a packet of 20 cigarettes costing 64 cents more, a 340ml can of beer four cents more, and a 750ml bottle of spirits R1,76 more.
Cigarettes will go up 16,55%, to R4,53 for 20; cigarette tobacco will rise 11,70%, to R139,04 a kilogram; cigars will increase 15,67%, to R1 233,04 a kilogram; and pipe tobacco will rise 17,30%, to R68,32 a kilogram.
The total tax burden (excise duties and VAT) as a percentage of the weighted average retail selling price will be 43% on spirits, 33% on clear beer, and 23% on wine, phased in over three years.
The tax on traditional African beer will remain unchanged at 7,82 cents a litre.
Taxes on ciders and alcoholic fruit beverages will increase from 143,6 cents a litre to 153,74 cents a litre.
Levies on fuel will also increase from April 7. Petrol and diesel will go up 15 cents a litre. The Road Accident Fund levy will rise by 5c a litre. – Sapa