No change in personal tax for SA’s top earners

SOUTH African high-income earners will be breathing a sigh of relief after learning that their personal income tax will remain unchanged and will not be adjusted for inflation this financial year, even though the government will increase the excise duties for luxury purchases.

Finance Minister Malusi Gigaba announced government would make no adjustment in the top four personal income tax brackets to support the progressiveness of the tax system. He said the Treasury would impose a higher estate tax rate of 25% for estates greater than R30 million, and increase the excise duty rate on luxury goods from 7% to 9%.

The government would also increase the plastic bag levy, the motor vehicle emissions tax and the levy on incandescent light bulbs to promote eco-friendly choices.

“We have increased personal income tax significantly in recent years, particularly at the higher income bands, and our corporate tax is high by international standards. In addition to VAT, we are increasing excise duties on luxury goods and estate duty on wealthy individuals,” said Gigaba.

“Government reviewed the potential contributions from the three major tax instruments which raise over 80% of our revenue: personal and corporate income tax, and VAT.” South Africa’s personal income tax burden has increased steadily from 8.3% of GDP in 2010/11 to 9.8% in 2017/18. Last year, the government added a new top income tax bracket of 45% for those earning above R1.5 million. This followed a one percentage point increase in personal income tax rate that affected all but the lowest-income tax bracket in 2015/16.

There would be no cause for celebration for the bottom three personal income tax brackets as the primary, secondary and tertiary rebates would be partially adjusted for inflation through a 3.1% increase in a bid to raise R6.8 billion.

Gigaba admitted raising taxes for lowgrowth earners when many citizens were struggling to make ends meet was not desirable, especially when the country’s position was weaker than it was during the 2008 financial crisis.

TREASURY WILL IMPOSE HIGHER ESTATE TAX RATE OF 25% FOR THOSE ABOVE R30M