Although the budget provided some relief for fiscal drag and the effects of inflation on income earners, substantially higher taxes on investments and higher indirect taxes have left many taxpayers worse off.
Projected revenue from individual taxpayers is expected to rise from R249.7-billion to R285.9-billion this year, adding R36-billion more to the fiscus.
About R9.6-billion in income tax relief to adjust for inflation, or bracket creep, was announced.
Anton de Klerk, financial director at Efficient Group, said the tax relief was 6.3%, in line with the inflation figure.
Taxpayers who receive a salary increase in line with inflation will pay the same amount of tax as in the previous tax year. Therefore it will not equate to an actual tax saving.
However, people earning up to R80 000 a year will see real tax relief. A person earning R80 000 a year will pay R685 less tax, a decrease of 18.8%, whereas individuals earning R65 000 a year will see a 72.5% decrease in their tax rates.
Although Finance Minister Pravin Gordhan did not increase personal tax rates, South Africans will pay significantly more in indirect taxes, such as the fuel levy, sin taxes and taxes on investments.
According to the Budget Review, individual investors will pay R800-million more in capital gains tax and a massive R5.5-billion in dividend tax this year.
An additional R4.5-billion will be paid in fuel levies, bringing total revenue from fuel to R42.7-billion, and the electricity levy will generate a further R1.9-billion.
Drinkers and smokers will pay an additional R1.84-billion in sin taxes – our “sins” in total will contribute R28.7-billion to the fiscus.
Therefore, income earners will ultimately pay an additional ÂR14.5-billion through indirect taxes, which more than offsets the income tax relief.
Fuel levy shock
Motorists will be shocked when they fill up with petrol on April 4 when the fuel levy will be increased by a massive 20c, representing a 15% increase on the existing fuel levy.
Combined with an 8c increase in the road accident fund levy and the expected 25c increase in the petrol price, motorists will see petrol increase by a total of 53c a litre, so you will pay R26 more when you fill a 50-litre tank. Taxes paid per litre of petrol will amount to R2.89 for petrol and R2.74 for diesel.
Impact of medical tax credit
From March 1 2012, tax deductions for medical schemes will be converted to a tax credit and, as a result, an income earner with a tax rate higher than 32% will pay more tax.
The reason for this change is that tax deductions favour higher income earners. A tax credit is more equitable.
With a tax deduction, a person who pays tax at the marginal rate of 40% receives a tax deduction of 40% on their medical scheme premium (to a capped amount) while a person with a marginal rate of 18% receives only an 18% deduction.
The monthly tax credit rate for members of medical schemes for the 2012-2013 tax year will be R230 for the first two beneficiaries and R154 for each further dependent.
This is in line with the tax deduction a person with a marginal tax rate of 32% currently receives on the capped medical scheme deduction of R720 a month.
So people with a higher marginal tax rate will lose the benefit of a tax deduction, which means their tax payable will increase. However, those paying a lower tax rate will benefit.