This is according to the 2015 Budget Review, presented by South African Finance Minister, Nhlanhla Nene on Wednesday.
“This raises tax by 21 rand a month for a taxpayer below age 65 with an annual income of 200,000 rand. Those earning 500,000 rand would pay 271 rand a month more, and at 1.5 million rand a year, the tax increase is 1,105 rand a month,” he said.
“Tax brackets, rebates and medical scheme contribution credits will be adjusted for inflation, as in previous years. The net effect is that there will be tax relief below about 450,000 rand a year, while those with higher incomes will pay more in tax.”
The review indicated that all income tax brackets and rebates would be increased by 4.2 per cent in order to provide relief for inflation-related earnings increases, or fiscal drag.
As a result of this, the tax-free threshold for individual taxpayers below 65 years will increase from 70,700 rand to 73,650 rand.
TAX POLICY IN SOUTH AFRICA
Personal income tax is one of the three main sources of tax revenue, along with corporate income tax and value-added tax (VAT), which will remain at 14 per cent for the current fiscal period.
“Personal income tax remains a buoyant source of revenue, but the slowdown in business conditions is reflected in lower-than-expected company tax, value added tax and customs revenue,” Nene stated.
“Even after lowering our expenditure ceiling and taking into account the need for sustainability in managing our debt, there is a structural gap between our revenue requirements and projected tax proceeds. To bridge this gap we require additional revenue.”
Tax revenue for the 2015/16 period will comprise 36.4 per cent from personal income tax, 18.7 per cent from corporate income tax, 26.2 per cent from VAT, seven per cent from customs and excise duties and 5.1 per cent from fuel levies.
NEW TAX REGIME FOR SMALL BUSINESSES
In additional to the increase on personal income tax, other proposals include raising the general fuel levy by 30.5 c/litre – which will take effect in April – and the Road Accident Fund (RAF) levy on fuel by 50 c/litre and providing a more generous turnover tax regime for small businesses.
“Following recommendations of the Davis Committee, a more generous tax regime is proposed for businesses with a turnover below one million rand a year,” Nene indicated.
“Qualifying businesses with a turnover below 335,000 rand a year will pay no tax, and the maximum rate is reduced from six per cent to three per cent. To complement this relief, SARS is establishing small business desks in its revenue offices to assist in complying with tax requirements.”
EXCISE DUTIES ON ALCOHOLIC BEVERAGES, TOBACCO PRODUCTS
According to the 2015 Budget Review, since 2002, tax rates on alcoholic beverages have consistently increased above inflation, and the amendments for 2015/16 will continue this trend with excise duty rate increases of between 4.8 and 8.5 per cent.
The excise duties on tobacco products increased between five and seven per cent and an additional excise duty category is proposed for grain-based fermented beverages.
“Members of the House are advised that excise duties on alcoholic beverages and tobacco products will again increase,” said the finance minister.
“The tax on a quart of beer will go up by 15½ cents, a bottle of wine will cost 15 cents more, a bottle of sparkling wine will go up by 48 cents, a bottle of whisky will be 3.77 rand more and a pack of 20 cigarettes will go up by 82 cents.”
TRANSFER DUTY RATES TO PROVIDE RELIEF
The review also indicated changes to the transfer duty rates and brackets in order to provide relief for middle income households.
“The new rates eliminate transfer duty on properties below 750,000 rand, while the rate on properties above 2.25 million rand will increase,” Nene said.
He concluded that the net effect of all of the aforementioned proposals on 2015/16 tax revenue is an increase of 8.3 billion rand, which will bring tax revenue for the year to around 10.4 per cent more than 2014/15 tax revenue.