The more you earn, the more you’ll pay
AS EXPECTED, the 2017-18 budget contains proposals which will result in increased taxes for South Africans.
This year the bracket creep that we have become accustomed to over the past few years has been withdrawn and tax rates are higher in real terms.
The maximum marginal rate increases to 45% for individuals earning more than R1.5-million. Trusts will now be taxed at 45% (41% in 2016) and dividends tax is increased from 15% to 20%.
The shortfall in tax is effectively borne by higher income earners. Other tax proposals include: ý South Africans who work outside of the country for more than 183 days in a year will only get relief from tax in South Africa if they are taxed in the country where they worked;
ý Legislation will be introduced to amend share buyback rules to discourage their use;
ý Amendments to the new Section 7C rules relating to loans made to trusts by individuals – such that loans made to companies owned by trusts are included in this legislation.
Some welcome relief is the extension of learnership tax incentive until 2022 and the extension of the employment tax incentive until 2019.
South African high-income earners will need to pay for the shortfall in tax collections – the more you earn, the more tax you pay seems to be a very appropriate comment for the next year.
David Honeyball is a tax partner at Grant Thornton Cape.