Weekend Argus (Saturday Edition)
HOW BUDGET 2019 WILL AFFECT YOU
Personal income tax rates stay the same, but the brackets have not been adjusted for inflation | martin.hesse@inl.co.za
FINANCE Minister Tito Mboweni’s Budget Speech in Parliament on Wednesday was surprisingly lenient on the taxpayer, who will have no added tax burden to speak of for the coming tax year. This in spite of the extreme pressures on the fiscus, the biggest of which is Eskom.
Whether the measures Mboweni proposes implementing – essentially reining in expenditure, re-allocating resources and receiving additional tax revenue of R15 billion – will be enough to ward off disaster at the faltering state-owned enterprise and go some way in fixing the economy are open to debate, of which there has been plenty in the past few days.
But how will Tito’s Budget directly affect your pocket as a taxpayer?
Some of the main ways are as follows:
The tables for personal income tax remain the same as last year.
Although this is good news in that it shows that the government is trying not to put further pressure on taxpayers, the bad news is that the rates do not take inflation (at 4% in January) into account, as they usually do to a greater or lesser extent. This step alone will provide the government with an estimated extra R13bn.
Marc Sevitz, director and chief finance officer of online tax service TaxTim, says keeping the tax brackets the same will have an impact on your take-home pay only when you receive a salary increase.
“If you receive an increase, what would have happened in the past is that you would have increased your tax payable, but due to the inflationary adjustment to the brackets, the tax on the increase would have been offset by this adjustment to some extent.
“So if your increase was inflationlinked and the adjustment to the brackets was inflation-linked, your tax increase would have been aligned. However, this is not the case now; the entire increase will be taxed at your marginal tax rate.”
Rebates will increase slightly.
Slight relief to taxpayers comes in the form of a small raise in rebates, which are the amounts the government “gives back to you” on the tax you owe. The minister has raised rebates by 1.1%, which, while hardly matching for inflation, has the effect of raising the tax thresholds by 1.1%. As can be seen on the table, you will pay no tax if your annual taxable income is less than R79 000 (for under-65s – up from R78 150), R122 300 (for people aged 65 to 74 – up from R121 000), or R136 750 (for people aged 75 or older – up from R135 300).
Medical tax credits will remain the same.
The medical tax credits, which partly compensate you for contributions to your medical scheme and for out-of-pocket medical expenses, will not increase.
With medical inflation hovering at a good few percentage points above the January inflation rate of 4%, this is a meaningful decrease in this tax break. The money the government saves through this measure is earmarked for the proposed
National Health Insurance scheme, which, according to the directorgeneral of the Treasury, Dondo Mogajane, at a press conference on Wednesday morning, remains a “core
programme” for the government.
“Sin” taxes will increase.
As has become customary in the annual Budget, “sin” products are targeted for revenue. Excise duties on alcohol and tobacco products will increase – this time by between 7.4% and 9%. The only product to escape an increase is sorghum beer. Among other products, you will now pay the government R3.15 (up 22 cents) on each bottle of wine you buy and R16.66 (up R1.14) on each pack of 20 cigarettes.
The sugar tax will increase.
The so-called “health-promotion levy”, implemented last year on sugary beverages, increases from 2.1c to 2.21c per gram of sugar above the threshold of 4g per litre.
Fuel levies will increase. A carbon levy on fuel of 9c a litre on petrol and 10c a litre on diesel will take effect from June 5. This will be in addition to the general fuel levy of R3.52 a litre on petrol and R3.37 on diesel (both up by 15c) and the Road Accident Fund levy of R1.98 a litre (up by 5c), effective on April 3. So from June 5, you be paying a total levy of R5.59 on each litre of petrol and R5.45 on each litre of diesel you put in your tank.
More products will be zerorated for value-added tax (VAT).
Following last year’s increase in VAT from 14% to 15%, to mitigate the effect on low-income households, the list of zero-rated items will be expanded to include white bread flour, cake flour and sanitary pads.
Corporate and small business taxes will remain the same.
Company tax remains at 28%, and there are no changes to the tax tables applying to small business corporations and the turnover tax for micro businesses.
Taxes on investments will remain the same.
There will be no change to the 20% withholding tax on dividends and the rates and exemption thresholds for capital gains
tax and interest income.
There are no changes to tax-incentivised savings.
The limits on tax-deductible contributions to retirement funds have not been adjusted and neither have the contribution limits to tax-free savings accounts.