South Africa’s Minister of Finance, announced that income tax is going up in South Africa for most individuals. But what exactly does this budget tax increase entail?
If you are into exclusive clubs – this is one “club” you don’t want to be part of. It affects those who have taxable incomes of R1. 5-million, or R125 000 a month and above. Minister of Finance, Pravin Gordhan, announced the creation of a new top personal income tax bracket where South Africa’s super rich would pay a tax rate of 45 percent.
In his speech Gordhan warned that South Africa was “at a crossroads” and “tough choices” had to be made.
The Minister of Finance had noted that in South Africa “95 percent of wealth is in the hands of 10 percent of the population”. The combination of this new top marginal income tax bracket and only limited relief for bracket creep, which protects taxpayers against losing more than they gain when an earnings increase pushes them into a higher tax bracket, is expected to raise an additional R16. 5-billion for the Treasury in the 2017/18 tax year.
As if that is not a lot, there is also an increase in sin taxes for consumers of alcohol and tobacco. Alcohol and tobacco excise duty rates will increase by 6.1 and 9.5% this year. According to National Treasury’s Budget Review document, the targeted excise tax burdens for wine, beer and spirits are 11%, 23% and 36% of the weighted average retail price respectively.
Petrol prices are also expected to have a bit of hike. The budget also included an increase of 30c per litre in the general fuel levy and 9c per litre in the road accident fund levy.
However, there was a little bit of tax relief in the affordable housing market through an increase in the threshold above which transfer duty is paid. There was also the annual allowance for tax-free savings accounts, which will be increased to R33 000 and the medical tax credit will be increased in line with inflation this year.