South Africa’s Annual Budget Speech was delivered on the 21st of February by Finance Minister Malusi Gigaba. We have highlighted some key points:
VAT to increase to 15%
Probably the most notable change in the proposed 2018/2019 budget is the suggested Value Added Tax (VAT) hike, which will increase from 14% to 15%. Gigaba reiterated that VAT has not been adjusted since 1993 and “is low compared to some of our peers” – such as Argentina and Russia.
Government is thus of the opinion that a VAT increase is unavoidable if South Africa is to maintain the integrity of its public finances.
Basic food items have been zero-rated and social grants enlarged
Poor households will find relief in the current zero-rating of basic food items such as maize meal, brown bread, dried beans and rice, whereas vulnerable households will be compensated through an above average increase in social grants.
Personal income tax increased
There will be a below inflation increase in the personal income tax rebates and income tax brackets with greater relief for people in the lower income tax bracket. Deceased estates greater than R30-million will be taxed at 25%.
Fuel levy up 11%
The fuel levy will increase by 52c per litre, with 22c going towards the general fuel levy and 30c going towards the Road Accident Fund levy.
Sin tax and excise duties up, carbon tax to be implemented
There will be an increase in alcohol and tobacco excise duties of 6% – 10% and carbon tax is set to be implemented on 1 January 2019.
Luxury goods will experience an increase in excise duty by 2%, bringing this tax to 9%.
Transfer duty on property to remain the same
Some good news is that no mention is made with regards to transfer duty and it seems transfer duty will still only be applicable to properties valued above R900,000.
This budget is reported to be “tough but hopeful” to generate the additional R36-billion for the nation’s coffers needed in tax revenue.
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