What you need to know about Budget 2017
South Africa’s Budget 2017 revealed that revenue has lagged behind the economy, leading to R30bn shortfall, to deal with this shortfall several tax changes have been proposed as highlighted below. It also painted an economy in dire need of economic growth. This is also mentioned in this Budget in a nutshell.
New taxes on the way
- Revenue has lagged behind the economy, leading to R30bn shortfall
- Total tax revenue for 2016/17 will be R1.14trn, up 7% on previous year
- S.A’s tax proposals will raise an additional R28bn
- A wealth tax will be introduced comprising a new top personal income tax rate of 45% for those with taxable incomes above R1.5mn. It is expected to bring in between R3bn-R5bn.
- Dividend withholding tax rate to be increased from 15% to 20%
- Treasury is looking at share repurchase schemes
- Tax free threshold increased from R75 000 to R75 750
- Personal tax changes are as follows:
- Fuel levy to increase 30c/litre and road accident fund levy – 9c/litre
- Excise duties for alcohol and tobacco to increase between 6-10%
- Relief will be provided in the affordable housing market
- Annual allowance for tax free savings accounts increases from R30 000 to R33 000
- Medical tax credit will be increased in line with inflation
- Consultations ongoing on tax on sugary beverages
- Proposed design of sugar tax has been revised to include both intrinsic and added sugars
- Sugar tax will be implemented later this year once details are finalised and legislation passed
- Proposed carbon tax & implementation date will be considered in Parliament this year
- S.A to sign a multilateral instrument this year
- SARS received VDP disclosures totalling R3.8bn in foreign assets
- Special VDP will be open until the end of August this year
- Multinational companies will be required to file further information with SARS
The State of S.A
- S.A’s income growth has been uneven
- 95% of S.A’s wealth is in the hands of 10% of the population
- 35% of the labour force are unemployed
- Over half of all children in Grade 5 cannot read adequately in any language
- A Charter of Economic Rights needs to be debated to deal with these glaring inequalities
The State of S.A’s economy
- S.A’s growth has been too slow at 1% a yr in real per capita terms
- S.A’s transformation will be built through economic participation, partnerships
- R28bn to be raised in taxes
- S.A’s budget deficit for 2017/18 will be 3.1% of GDP
- S.A’s government debt will stabilise at about 48% of GDP over next 3yrs
- Spending priorities: Education, health services & municipal functions in rural areas
IMF projects world economy to grow by 3.4% in 2017 & 3.6% in 2018
Economic inclusion is being prioritised everywhere
S.A’s GDP expected to increase from 0.5% last yr to 1.3% 2017
S.A growth to be spurred by commodity prices rebounding
Plans are afoot to get S.A out of the present low growth trap
- S.A is finalising legislation relating to mining development & land redistribution
- S.A is implementing transition from analogue to digital television
- S.A is continuing its independent power producer programme
S.A’s 2017 Budget Allocations:
- R3.9 billion for small, medium and micro enterprises and cooperatives.
- R4.2 billion for industrial infrastructure in special economic zones and industrial parks.
- R1.9 billion for broadband implementation.
- R3.9 billion for the Council for Scientific and Industrial Research.
- An additional R494 million for tourism promotion.
- An additional R266m to support the aquaculture sector and realise the goals of the Oceans Economy Phakisa Operation.
- Spending on agriculture, rural development and land reform amounting to nearly
- R30 billion by 2019/20.
- Provincial Roads Maintenance Grant is allocated R10.8 billion in 2017/18
- SANRAL receives R15.4 billion over the period
- The Department of Telecommunications and Postal Services receives R1.9 billion
- The Passenger Rail Agency of South Africa to receive R16.7 billion
- Public Transport Network Grant receives R6.2 billion in 2017/18.
- R600 million over the medium term is reprioritised to the Social Housing
- R18.4 billion over the medium term is allocated to the Regional Bulk Infrastructure Grant
- R12.5 billion to the Water Services Infrastructure Grant
- R1 billion is added to the local government equitable share in 2018/19
- An additional R5bn to the R32bn previously announced has been allocated to higher education
The shape of S.A’s finances
- The proposed expenditure for 2017/18 totals R1.56 trillion
- Interest on debt amounts to R169 billion
- Projected revenues amount to R1.41 trillion
- The balance of R149 billion, or 3.1% of GDP, will be borrowed
- S.A’s government debt stands at R2.2 trillion, or 50.7% of GDP
- Funds available after providing for debt service costs & contingency reserve up 6.9% to R1.24trn next year; are projected to rise to R1.43 trillion in 2019/20
Over the next three years:
- 47.5% of available funds will be allocated to national government
- 43.4% to provinces and
- 9.1% to local government
Public service wage bill
- Provincial spending on personnel has declined to just under 60% in 2016/17
- Three new conditional grants will take effect in 2017/18
- National Treasury & provincial treasuries to focus on four “game changers”
- Social assistance grants to be increased in April
S.A’s social grant allocations:
- The old age grant will increase by R90 to R1600 for pensioners over the age of 60, and R1620 for those over 75.
- The disability and care dependency grants also increase by R90 to R1600 a month.
- Foster care grants increase by R30 to R920 a month.
- The child support grant increases by R20 to R380 a month
- Eleven NHI pilots have yielded valuable insights, on which to build
- NHI Fund will be established
- Spending on basic education next year will be over R240bn
- The Heher Commission of Inquiry into Higher Education will complete work by June
- Public procurement will amount to about R1.5trn over next 3yrs
- Further procurement reforms to be introduced this year
- Draft Public Procurement Bill to be published shortly
Forex collusion among banks
- Market conduct regulator proposed
- Banks need tougher rules to cover financial market abuses
- SARB & Treasury have initiated work on a more comprehensive Financial Markets Review Financial Sector Summit to take place in 2017