Amid national excitement – or dread – South Africa’s Annual Budget Speech was presented yesterday by Finance Minister Pravin Gordhan.

Last year we experienced a R30 billion shortfall in expected tax receipts. This is the largest shortfall in revenue since GFC-impacted 2009/10. Income tax generated less than R15.2 billion of what was expected and VAT was R1.2 billion below target. The shortfall for Customs Duty was R6.5 billion.

R28 billion is sought to be raised through an increase in tax, and Government spending is to be reduced by R10 billion. South Africa’s top 100,000 income earners will bear an effective R11.2 billion of this additional tax burden through an increase of 4% in the top marginal tax rate and an increase of 5% in dividend withholding tax.

A few of the highlights are:

Income Tax

  • A new tax bracket was created for annual income over R1.5 million. South Africans who earn over this amount will be taxed at 45%.
  • Gordhan hopes that this will add an additional R16.5 billion to the fiscus.
  • This year’s adjustment to the taxable income threshold (which is usually adjusted to off-set inflation) will be minimal. R12.1 billion is expected to accrue through this “bracket creep”.

Company Tax

  • Dividend withholding tax has increased from 15% to 20%, which will raise R6.8 billion.
  • It is expected that company tax will generate R218 billion in the year to come.

Fuel Levies

  • Fuel levy will increase by 30c per litre and the Road Accident Levy will increase by 9c per litre.
  • This will hopefully generate an additional R3.2 billion.

Sin Tax

  • 9 billion will be generated from an increase in excise duty for alcohol and tobacco.
  • The following increase will take place:
    • 12c/340ml – Beer, ciders and alcoholic fruit beverages
    • 26c/750ml – Fortified wine
    • 23c/750ml – Unfortified wine
    • 70c/750ml – Sparkling wine
    • 443c/750ml – Spirits
    • 106c/pack of 20 – Cigarettes
    • 119c/50g – Cigarette tobacco
    • 40c/25g – Pipe tobacco; and
    • 658c/23g – Cigars

Sugar Tax

  • The proposed rate is 2.1c per gram of sugar content above 4 grams per 100ml.

However, this is still in negotiation and may be implemented later this year.

What’s the good news?

Transfer Duty

  • Not payable for properties under the value of R900 000.00. Previously, this amount was R750 000.00.

Tax-free savings accounts

  • Allowance for tax-free savings accounts has been increased to R33 000.00.
  •  No adjustments will be made for Value Added Tax (VAT), however a revised carbon tax will be published for public consideration by the middle of this year.

This year’s Budget Speech centred around transformation. Ultimately, the budget must reflect South Africa’s social and economic responsibilities and priorities, which must in turn be balanced against Government’s duty and responsibility to ensure financial sustainability.

For further queries, please do not hesitate to contact any of our attorneys.

For legal advice about Conveyancing and Property Law

Nicholas Hayes 

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David Kagan     

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Basilio de Sousa

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Nicholas Hayes 

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