2017 Budget Speech - The big squeeze
They say, when life gives you lemons, make lemonade. But if yesterday’s budget speech by South African Finance Minister Pravin Gordhan is anything to go by, chances are you might just be taxed for that too. Especially if you put more sugar in your mix. For the last two weeks, media headlines have been abuzz with expert predictions and assumptions. The majority of which welcomed VAT increase and cautioned against the introduction of a top marginal income bracket. Well, tax it seems was the order of the day. Let’s take a look at what the 2017 Budget Speech means for South African taxpayers.
- An additional R28bn will be collected by taxing those who earn more than R1.5m per year 45%, previously 41%. Said to raise R11.2bn.
- A fuel levy increase of 30 cents per litre. Motorists can expect to pay R3.15/litre for petrol and R3.00/litre for diesel come 5 April 2017.
- Rise in sin taxes on alcohol and tobacco. This increase combined with the increased fuel taxes will increase revenue by R5.1bn.
- Limited adjustment for bracket creep. “Bracket creep” (also referred to as “fiscal drag”) occurs when personal income tax tables are not fully adjusted for inflation, so that inflationary salary adjustments push taxpayers into a higher tax bracket, reducing their after-tax income."
- R6.8bn will be collected through a higher dividend withholding tax rate.
- As soon as the necessary legislation is approved, government will implement a tax on sugary beverages. The rate will be 2.1c per gram for sugar content above 4g per 100 ml.
- A revised Carbon Tax Bill will be published for public consultation and tabling in Parliament by mid-2017.
- The first R900 000 of the value of property acquired from 1 March 2017 will be taxed at zero percent. Before 1 March 2017 the first R750 000 of the value of property was taxed at zero percent.
- Personal income tax will bring in R482bn, VAT R312bn, company tax R218bn, fuel levies R96.1bn and customs and excise duties R96bn in the coming year.
The finance minister called for radical economic transformation in the 2017 Budget Speech. Middel and Partners agrees that radical transformation is key for South Africa at this point. However squeezing high income earners to fork out even more and hiking fuel prices might plug a few holes, but it certainly doesn’t kick-start transformation. In fact, it just encourages those high earners to take their money elsewhere, which they can. To achieve true transformation we need to take an in-depth look at regulation, state spending and a more diversified economy which creates jobs. This can only be achieved by building the widest possible partnerships to promote consensus and more importantly, action.
Middel & Partners auditors established since 1992, is registered with the Independent Regulatory Board for Auditors (IRBA), and is registered as JSE recognized auditors.