Budget a blow to rich and poor

Whether rich or poor, the national budget announced this week by minister Malusi Gigaba will leave all South Africans out of pocket.

This is largely due to the one percent increase in Value Added Tax (VAT), from 14% to 15% from 1 April. The current zerorating on basic foodstuffs such as maize meal, brown bread and rice will remain in place to somewhat soften the blow.

To further add to the plight of ordinary taxpayers, the general fuel levy will increase in total by 52 cents per litre, allowing for 22 cents per litre for the general fuel levy, while the Road Accident Fund levy will rise by 30 cents per litre. This will take effect on 4 April. The Carbon Tax Bill is expected to be enacted before the end of 2018, with the tax to be implemented from 1 January 2019.

There will also be no respite for those who would like to drown their sorrows. Smokers and drinkers will pay more as excise duties on tobacco products will increase by 8.5%, and those on alcohol between 6% and 10%. The much-talked-about health promotion levy, which taxes sugary beverages, will be implemented from 1 April.

Social grants

Vulnerable households will be compensated to a limited extent through an above average increase in social grants.

“Government has taken deliberate steps to adjust social grant values above inflation to at least partially cover for the proposed increase in VAT.

“The Old Age, disability and care dependency grants will increase on 1 April from the existing R1 600 by R90 to R1 690 and by a further R10 to R1 700 on 1 October.

"The Child Support grant will increase from the baseline of R380 to R400 on 1 April and to R410 on 1 October. This is a 6.6% annual increase,” Gigaba said.

No inflation adjustment was announced for the four wealthiest income tax brackets and high-income earners will bear the brunt of these increases, while the bottom three personal income tax brackets and the primary, secondary and tertiary rebates will be partially adjusted for inflation through a 3.1% increase.

The top four brackets will remain unchanged.

Although the muchspeculated wealth tax was not introduced, the ad-valorem excise duty rate on luxury goods, seen as items accessed by the rich only, increases from 7% to 9%, effective from 1 April.

The classification of cellular telephones will be updated to include “smartphones” to ensure they attract ad valorem excise duties, while government will consult on a proposal to replace the flat rate for cellphones with a progressive rate structure based on the value of the phone.

Estate duty will also increase from 20% to 25% for estates of R30 million or more. This will take effect on March 1. No change was made to capital gains or dividend taxes. The dividends tax rate remains unchanged at 20% while the maximum effective capital gains tax rate for individuals stays at 18%.

Those lucky enough to have a private medical aid can sigh with relief as the medical tax credit will be reviewed only after the Davis Tax Committee presents its recommendations.

Over the next three years, below-inflation increases in medical tax credits will help government to fund the roll-out of the national health insurance. Government will increase the medical tax credit from R303 to R310 per month for the first two beneficiaries, and from R204 to R209 per month for the remaining beneficiaries.

Gibaba said the government would be spending R792 billion on basic education, R668 billion on health and R528 billion on social grants, over the medium term.

To further add to the plight of ordinary taxpayers, the general fuel levy will increase in total by 52 cents per litre.