2017: Brace your­self for a bumpy ride

Bud­get 2016 is good news, but the tax­man may be de­lay­ing the in­evitable, write and

CityPress - - Business -

The good news from this week’s bud­get speech was that there will be some re­lief in per­sonal taxes, but the bad news is that the ground­work has been laid for hefty tax in­creases for the next two years.

The tax changes were con­tained to fis­cal-drag changes and in­creases in cap­i­tal gains tax, as well as the usual in­creases in the fuel levy, sin and en­vi­ron­men­tal taxes.

The govern­ment would raise an ex­tra R48 bil­lion in taxes over the next three years by in­creas­ing the rate of tax on a num­ber of fronts, Fi­nance Min­is­ter Pravin Gord­han an­nounced in Par­lia­ment this week.

Th­ese tax in­creases will be made up by tax hikes amount­ing to R18 bil­lion in the 2017 fi­nan­cial year, fol­lowed by a fur­ther R15 bil­lion each in the 2018 and 2019 fi­nan­cial years.

On top of the tax hikes pro­posed in the 2016 fi­nan­cial year, ad­di­tional tax mea­sures would be out­lined in fu­ture bud­gets, said Na­tional Trea­sury di­rec­tor-gen­eral Lungisa Fuzile.

In­cluded in Gord­han’s tax pro­pos­als is a 30c/litre hike in the gen­eral fuel levy, as well as the in­tro­duc­tion of a tyre levy to fi­nance re­cy­cling pro­grammes, in­creases in the in­can­des­cent globe tax, the plas­tic bag levy and the mo­tor ve­hi­cle emis­sions tax.

The tyre levy will be im­ple­mented on Oc­to­ber 1.

Per­sonal in­come tax re­lief will amount to R5.5 bil­lion in the 2016 fi­nan­cial year from R8.5 bil­lion last year. If the tax ta­bles were ap­pro­pri­ately ad­justed for in­fla­tion, this would have pro­vided R13.1 bil­lion in tax re­lief. “The bulk of the tax in­creases will fall on bet­ter-off South Africans,” Na­tional Trea­sury said.

As a re­sult, rev­enue from per­sonal in­come tax is ex­pected to in­crease by 13% over the next fis­cal year from R392 bil­lion to R441 bil­lion.

Of the R441 bil­lion ex­pected to be col­lected through per­sonal in­come tax in 2016/17, nearly 36% (R157 bil­lion) will come from the 3.2% of reg­is­tered tax­pay­ers who earn R1 mil­lion or more a year.

Less than 1 mil­lion peo­ple earn R500 000 or more a year, which rep­re­sents 3% of reg­is­tered tax­pay­ers and makes up 64% of tax rev­enue.

A to­tal of R9.5 bil­lion will be raised through in­creases in ex­cise du­ties, the gen­eral fuel levy and en­vi­ron­men­tal taxes.

For the first time, Gord­han an­nounced the pro­posed in­tro­duc­tion of a tax on sugar-sweet­ened bev­er­ages to help re­duce ex­ces­sive sugar in­take. This new tax is set to be im­ple­mented on April 1 next year.

On the is­sue of sin taxes, Gord­han an­nounced in­creases of be­tween 6% and 8.5% in the du­ties on al­co­holic bev­er­ages and to­bacco prod­ucts.

Turn­ing to wealth taxes, Gord­han said taxes on wealth were un­der re­view by the Davis Tax Re­view Com­mit­tee.

“Higher cap­i­tal gains in­clu­sion rates are pro­posed, to­gether with an in­crease in the an­nual amount above which cap­i­tal gains be­come tax­able,” he said.

“The trans­fer duty rate on prop­er­ties above R10 mil­lion will in­crease from 11% to 13%, and mea­sures are pro­posed to strengthen the es­tate duty and do­na­tions tax,” he added.

Ad­just­ments to cap­i­tal gains tax and trans­fer duty will raise R2 bil­lion.

To­tal tax rev­enue for the 2017 fi­nan­cial year is fore­cast to be R1.32 bil­lion. Per­sonal in­come tax will make up 37.5% of the to­tal tax take, VAT is fore­cast to make up 25.6% and cor­po­rate in­come tax is es­ti­mated to con­trib­ute 16.9%.

The is­sue of in­creased VAT was ad­dressed in the Bud­get Re­view, which says that the cur­rent tax mix sug­gests that there may be greater room to in­crease in­di­rect taxes, such as VAT, as cor­po­rate and in­come taxes are rel­a­tively high, while “the VAT rate is lower than in most other ju­ris­dic­tions, es­pe­cially those with high lev­els of so­cial spend­ing”.

Gord­han said con­cerns have been raised that VAT is a re­gres­sive tax that could hurt the poor.

The ques­tion, of course, is whether there would be political ap­petite to in­crease VAT, which would, in all like­li­hood, be ve­toed by labour unions.

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