By Tertius Troost, Tax Consultant at Mazars
The South African braai – a pastime for all seasons. In our diverse nation, this is truly an activity all can relate to. As we edge closer to 1 April 2018 it seems that this delightful pastime will come at an increased cost.
For many this sounds like an April Fool’s joke, but on 1 April 2018 we will see the introduction of the health promotion levy (colloquially referred to as Sugar Tax) and the increase of the VAT rate from 14% to 15%. In addition three days later, on 4 April 2018, South Africans will be paying more for fuel due to the increase in the general fuel levy (+ R0.22/litre) and Road Accident Fund levy (+ R0.30/litre).
In anticipation of these increases, together with the usual increases in sin taxes already applicable from 1 March 2018, I have decided to perform a back-of-the-blitz-packet calculation to illustrate the amount of tax that will be paid by a person purchasing goods for a braai. Most citizens of Mzansi are not even aware of these taxes and their additional contribution to the South African fiscus – hence it is sometimes referred to as stealth taxes.
In the following calculation, I have selected certain South African favourites to demonstrate the effect of the stealth taxes on a braai after 4 April 2018:
The results are quite alarming. On a budget of R600, the total stealth taxes amount to R182.57, or put differently, 30% of the total price. That said, the results are somewhat skewed, due to the sin tax on spirits (i.e. the brandy) making up a third of the total tax payable. Even if this item is removed in totality, approximately 22% of the total basket still consists of taxes.
It should be taken into account that these items are purchased with so-called after-tax money. In other words, for a salary earner, the R600 spent is the amount remaining after taxes have been withheld by an employer (in the form of pay-as-you-earn). Therefore, a person with an average personal income tax liability of 35% would need to earn R923 before tax, and after R323 has been paid in personal income tax, a further R182 would be paid in the form of indirect taxes when purchasing the above goods. This person effectively pays 55% tax on the goods for the braai.