Despite collecting R29-billion more in taxes than expected, Finance Minister Trevor Manuel was not as generous to taxpayers as he has been in the past. The R8,4-billion of personal and R12,4-billion in total tax relief has only offset inflation and partially offset the effects of changes last year to the taxation of medical aids and car allowances.
However, any tax relief is welcome, and people earning up to R43 000 a year will pay no tax compared with the threshold of R40 000 last year. In order to fall into the top tax rate of 40%, you now have to earn R450 000 compared with R400 000 last year.
An individual earning R200 000 a year will pay R2 415 less tax over the next year, which is a 6,4% tax reduction. Top earners with R1-million or more a year income will pay R6 415 less tax, which equates to a 1,8% tax relief. The number of registered taxpayers increased last year by 176 000. But only 4,9-million people pay tax in South Africa, which means our tax base remains extremely narrow with a high burden on those who do pay.
The real champagne cork popping will come from the retirement industry and pensioners, because of the abolition of the retirement fund tax. While the minister has, over the years, given substantial tax relief to pensioners in the form of tax exempt interest income, they still paid tax on their retirement funds. This will put a further R3-billion into the hands of retirement fund members.
To stimulate savings there are further tax breaks for interest income, rising from R16 500 to R18 000 a year. This means you can invest just more than R200 000 in a money market fund yielding 7% tax free. Pensioners receive R26 000 interest-free income or R370 000 invested tax free.
There is some adjustment to the medical aid contribution cap, which increased from R500 to R530 for the first two members and R300 to R320 for each additional beneficiary. This is supposed to offset inflationary increases, but only equates to tax relief of just more than 6% for a family of four. Most medical aid increases were in the region of 10% or more.
As promised with the introduction of capital gains tax, there has been a further adjustment to account for inflation. The annual exclusion threshold for capital gains has been increased from R12 500 to R15 000. This means the first R15 000 of capital gain is exempt from tax.
No further foreign investment allowances were made for individuals, although, as Reserve Bank Governor Tito Mboweni pointed out, at the current R2-million level there are probably not a lot of people who could utilise much more.
You will also pay R6 more to fill up your 60-litre petrol tank owing to an increase in levies of 10c. Half will go to the general fuel levy and half to the Road Accident Fund. For every litre of petrol you purchase, R1,62 goes to taxes.
Overall, the budget is not going to please a certain taxi driver in Cape Town who was complaining about all the taxes he pays. “I pay tax on my salary and then I pay tax when I go to the shop and tax again when I go to fill up my car with petrol. And what do I get for it?” he moaned. But he was wearing some trendy sunglasses, so he may be glad to know that the ad valorem excise duty on sunglasses has been abolished.
Paying for your sins
Despite the massive overrun in taxes, the minister likes to keep our vices in check by increasing taxes on our sins.
A pack of cigarettes will cost 60c more, beer 5c, wine 10c and spirits R1,88 a bottle. So if you smoke a pack of cigarettes and drink two beers a day, and consume two bottles of wine and a bottle of spirits a week, your weekly sin bill will go up R3,52.
Death and taxes
In line with rising property prices, which have made a mockery of estate duty levels, the minister has again increased estate duty, from R2,5-million to R3,5-million.
The exempt tax threshold on capital gains that accrues on death has been increased from R60 000 to R120 000.
The amount you can donate to another person tax-free has been increased from R50 000 to R100 000.