Finance Minister Pravin Gordhan delivered his budget speech on Wednesday‚ introducing a few sneaky new taxes and surprising those who thought VAT or personal taxes might increase.
The minister may have suffered from his own nagging cough through the speech‚ but here’s how you can expect to cough up for the next year.
1) Personal Income Tax
Personal income tax is not going up. In fact‚ income tax paid by individuals in middle and lower-income tiers will go down by R5.5-billion this year as the government makes room for inflation in the price of goods and the implementation of other‚ less direct taxes on citizens.
The lowest rung for tax‚ from zero to R188‚000 per year‚ will see taxpayers handing over 18% of their salaries‚ and the top bracket will remain unchanged at 41% for those earning above R701‚301 per year.
2) Corporate Tax
The corporate tax rate will remain unchanged at 28%. The finance minister is all too aware that tinkering with the corporate tax rate might discourage corporate investment in South Africa.
3) University Fees
The students have been heard. Over the next three years government plans to spend R93.1-billion on universities‚ including R41.2-billion going to the National Student Financial Aid Scheme. The cost to taxpayers of keeping student fees at last year’s level is R5.7-billion.
4) Sneaky Taxes
Sneaky taxes have been introduced. These secondary taxes are not directional – in other words‚ what is collected by the plastic bag levy‚ for example‚ does not necessarily go towards environmental causes. It all lands up in the government’s coffers. But a big increase in one sneaky tax would look suspicious‚ so the finance minister has spread them out across a range of our favourite consumables.
From 1 April next year – and this is not an April fool’s joke – a tax on fizzy drinks containing sugar as a sweetener will be introduced. Ostensibly‚ this is supposed to help South Africans cut down on sugar‚ just like the sin taxes help us cut down on smoking and drinking alcohol.
Also to be introduced on 1 October this year is a tyre levy‚ at R2.30 per kilogram of tyre. Every car on our roads needs new tyres from time to time‚ so this is a sweet spot for new taxation. There’s also a motor vehicle emissions tax for passenger cars of R100 for every gram of emissions/km. In short‚ this will make cars more expensive for buyers.
The plastic bag levy will rise from 6 cents to 8 cents per bag and an “incandescent globe tax” increases from R4 to R6 per bulb.
5) Capital Gains Tax
Capital gains tax will go up to a maximum rate of 16.4% for individuals and special trusts‚ while companies will pay 22.4% and other trusts 32.8% on disposal of assets‚ but the thresholds above which CGT applies will also rise. If you sell a primary residence and make a profit of R2-million or more‚ you’ll pay this tax‚ but the sale of most personal assets and retirement benefits will be excluded. Individuals and special trusts will have an annual exclusion of R40‚000 as a threshold before CGT kicks in.
6) More Taxes
Royalty and dividend taxes remain unchanged at 15%‚ as does value-added tax at 14%.
7) Grants
Social spending is going up‚ with old age‚ disability and care dependency grants rising by R80 to R1‚500 in April 2016‚ and by a further R10 to R1‚510 in October. Child support grants go up by 6.1% to R350. Government employees on pensions will see their monthly payouts rise by 5.5%.
8) Health Insurance
National Health Insurance is coming‚ with a pilot project costing R4.5-billion over the next three years.
9) Sin Taxes
Sin taxes are up‚ as always. Alcoholic beverages will go up in price by 6% to 8.5%‚ with cigarettes going up by 6.7%. These increases will raise about R9.5 billion.
Consumers will now pay 11c more for a can of beer‚ 18c more for a bottle of wine‚ R3.94 more for a bottle of spirits‚ and 82c more for a packet of cigarettes.
10) Wealth
Greater global collaboration between tax authorities means the super-rich have little time to declare offshore assets and income before amnesty and reasonable penalties apply. SARS is also closing the net on corporate tax avoidance in complex structuring. Under a voluntary disclosure programme‚ people with undeclared offshore income and assets have a six-month period between October 1 2016 and March 31 2017 to regularise their affairs. Tackling clever restructuring will effectively broaden the tax base and provide more revenue for the country.
- Tiso Black Star Group Digital/Business Times
Ten things you need to know about the 2016/17 budget
The minister may have suffered from his own nagging cough through the speech‚ but here’s how you can expect to cough up for the next year.
1) Personal Income Tax
Personal income tax is not going up. In fact‚ income tax paid by individuals in middle and lower-income tiers will go down by R5.5-billion this year as the government makes room for inflation in the price of goods and the implementation of other‚ less direct taxes on citizens.
The lowest rung for tax‚ from zero to R188‚000 per year‚ will see taxpayers handing over 18% of their salaries‚ and the top bracket will remain unchanged at 41% for those earning above R701‚301 per year.
2) Corporate Tax
The corporate tax rate will remain unchanged at 28%. The finance minister is all too aware that tinkering with the corporate tax rate might discourage corporate investment in South Africa.
3) University Fees
The students have been heard. Over the next three years government plans to spend R93.1-billion on universities‚ including R41.2-billion going to the National Student Financial Aid Scheme. The cost to taxpayers of keeping student fees at last year’s level is R5.7-billion.
4) Sneaky Taxes
Sneaky taxes have been introduced. These secondary taxes are not directional – in other words‚ what is collected by the plastic bag levy‚ for example‚ does not necessarily go towards environmental causes. It all lands up in the government’s coffers. But a big increase in one sneaky tax would look suspicious‚ so the finance minister has spread them out across a range of our favourite consumables.
From 1 April next year – and this is not an April fool’s joke – a tax on fizzy drinks containing sugar as a sweetener will be introduced. Ostensibly‚ this is supposed to help South Africans cut down on sugar‚ just like the sin taxes help us cut down on smoking and drinking alcohol.
Also to be introduced on 1 October this year is a tyre levy‚ at R2.30 per kilogram of tyre. Every car on our roads needs new tyres from time to time‚ so this is a sweet spot for new taxation. There’s also a motor vehicle emissions tax for passenger cars of R100 for every gram of emissions/km. In short‚ this will make cars more expensive for buyers.
The plastic bag levy will rise from 6 cents to 8 cents per bag and an “incandescent globe tax” increases from R4 to R6 per bulb.
5) Capital Gains Tax
Capital gains tax will go up to a maximum rate of 16.4% for individuals and special trusts‚ while companies will pay 22.4% and other trusts 32.8% on disposal of assets‚ but the thresholds above which CGT applies will also rise. If you sell a primary residence and make a profit of R2-million or more‚ you’ll pay this tax‚ but the sale of most personal assets and retirement benefits will be excluded. Individuals and special trusts will have an annual exclusion of R40‚000 as a threshold before CGT kicks in.
6) More Taxes
Royalty and dividend taxes remain unchanged at 15%‚ as does value-added tax at 14%.
7) Grants
Social spending is going up‚ with old age‚ disability and care dependency grants rising by R80 to R1‚500 in April 2016‚ and by a further R10 to R1‚510 in October. Child support grants go up by 6.1% to R350. Government employees on pensions will see their monthly payouts rise by 5.5%.
8) Health Insurance
National Health Insurance is coming‚ with a pilot project costing R4.5-billion over the next three years.
9) Sin Taxes
Sin taxes are up‚ as always. Alcoholic beverages will go up in price by 6% to 8.5%‚ with cigarettes going up by 6.7%. These increases will raise about R9.5 billion.
Consumers will now pay 11c more for a can of beer‚ 18c more for a bottle of wine‚ R3.94 more for a bottle of spirits‚ and 82c more for a packet of cigarettes.
10) Wealth
Greater global collaboration between tax authorities means the super-rich have little time to declare offshore assets and income before amnesty and reasonable penalties apply. SARS is also closing the net on corporate tax avoidance in complex structuring. Under a voluntary disclosure programme‚ people with undeclared offshore income and assets have a six-month period between October 1 2016 and March 31 2017 to regularise their affairs. Tackling clever restructuring will effectively broaden the tax base and provide more revenue for the country.
- Tiso Black Star Group Digital/Business Times
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