Mixed reactions to 2015 budget

Finance Minister Nhlanhla Nene’s 2015/16 budget contained mixed messages for individual taxpayers, PwC said on Wednesday.

PwC tax consultant Ian Wilson said in a statement that measures announced in the budget signalled relief for low- to middle-income earners and increased the income tax burden for middle- to high-income earners.

“The usual relief in the form of widened tax brackets and increased personal rebates has been neutralised for taxpayers with annual taxable incomes in excess of R450 000 by an increase in the tax rates by one percent for all brackets other than the lowest, which remains at 18%.” 

Senior tax manager Karen Botha said that a taxpayer earning around R100 000 per year would have an additional R44.25 extra in their pockets every month, barely covering ever-rising costs of fuel and consumables.

However, a taxpayer earning around R1-million a year could expect to have R379.22 less cash to take home each month.

“It is incredible to think that 11% of registered taxpayers bring in 61% of the total personal income tax payable in South Africa, yet the lower income earners get to take more home on a monthly basis,” Botha said. “I am not sure for how much longer the 11% will tolerate this.”

Medical scheme contribution tax credits were increased marginally to R270 per month for the first two beneficiaries and R181 per month for each additional beneficiary. Wilson said: “This is a form of tax relief but any benefit needs to be compared with potential increases in fringe benefit taxation on employer contributions to medical schemes.”

Budget Speech 2015: Decoded. (Deloitte, YouTube)

Nene should have been bolder
Congress of the People (Cope) said Nene should have announced bolder steps to reduce government spending. 

“Minister Nene should have taken the bull by the horns and demanded a decrease in the size of government and a substantial reduction in consumption side expenditure,” Cope leader Mosiuoa Lekota said in a statement. “He shied away from this,” said Lekota.

Nene announced that consolidated government spending was expected to be R1.35-trillion, and revenue about R1.2-trillion. Lekota said national debt in 2018 would be at around R2.3-trillion, which was unsustainable.

He said Nene had raised concerns that substantial repayment of debt was coming due, but made no mention of where this money would come from. “How is this going to be paid?” Lekota asked. 

“In the past few years short-term debts were being converted by the government to long-term debt. Is he going to persist with that practice and encumber our youth to settle these debts in the future?” 

Cope supported Nene in implementing new requirements for the Auditor General to furnish compliance reports, and welcomed the move to give additional funding to the public protector’s office. Cope believed the creation of a single supplier database interfaced with the South African Revenue Service and the payroll was another progressive step. 

“If municipalities follow the Sars model for electronic payments, all sides will be well served,” Lekota said.

Meanwhile, farmers’ organisation TAU SA said agriculture had very little to be thankful for following the tabling of Finance Minister Nhlanhla Nene’s 2015/16 budget.

“With the current severe drought, we would have liked that the minister [of finance] would have made an allocation for drought relief in advance,” TAU SA said in a statement on Wednesday. 

“The earlier farmers who are hit by the drought can be helped back on their feet, the less food needs to be imported. Imports of food will have an adverse impact on the country’s payment balance.” 

The cutting of the overall agriculture budget to R6.38-billion showed it was not a priority, the organisation said. The fuel levy would not bode well for farmers. “This will have a negative effect on the economy, while it will lead to rising food prices. 

“Whether it’s a wise decision to allocate as much to emerging farmers while commercial farmers are struggling to keep their heads above water, is an open question.”

Tisa welcomes tax hike
The Tobacco Institute of South Africa (Tisa) gave Nene a pat on the back for maintaining the 52% tax on tobacco products.

“While taxes on tobacco products remain an extremely valuable source of income for governments all over the world, as taxes rise and products become more expensive, illegal operators and organised crime syndicates are the immediate beneficiaries, as they do not pay taxes,” Tisa chief executive Francois van der Merwe said in a statement. 

“Illegal operators are thereby able to sell tobacco products at very low prices in comparison to legal products, which in turn stimulates consumption.” 

Nene announced in his 2015/16 budget that the excise duty on a pack of 20 cigarettes would increase by 82 cents.

Fuel levy hike
The Road Accident Fund (RAF) was given a temporary lifeline with Nene’s announcement of a 50c hike in the fuel levy.

“This raises the compensation scheme’s primary source of income from 104c to 154c per litre of fuel sold, a percentage increase of 48%, which roughly generates a total fuel levy of R2.66-billion per month for RAF’s coffers from July 2015,” the RAF said in a statement.

The RAF said motorists’ additional contribution towards the fuel levy guaranteed that road users would still get cover under the current compensation scheme. RAF chief executive Eugene Watson said although the extra money would help, it would not solve all its “legacy problems”. 

“Initially, the extra fuel levy will not speed up claims payments. If we continue to maintain our high productivity levels, receive no further increases from the fuel levy, and delay the implementation of the Road Accident Benefit Scheme, our backlog will simply continue to grow,” he said.

Madonsela pleased
The office of the public protector was saved from insolvency with a R60-million lifeline in the budget, Beeld reported on Thursday. 

Nene announced in his budget presentation that the protector would receive that amount over three years. In 2013/14 the protector was allocated R199.3-million, in 2014/15 R217.6-million, and in the coming year it would rise to R246.1-million. 

Public protector Thuli Madonsela said she was relieved and grateful, but it was a drop in the ocean. Last year she told Parliament her office was “technically insolvent” because of the growth of the organisation, and its workload over the past five years. 

Her staff of 314 had to handle 40 000 cases last year. 

Her spokesperson, Oupa Segalwe, said Madonsela was thankful that her pleas did not fall on deaf ears and though little, it would definitely bring relief. The protector’s office would still have to make drastic cutbacks. – Sapa, Staff reporter

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