BUDGET: No personal income tax increases, brace for new taxes
For those who missed it, Finance Minister Pravin Gordhan’s first comeback National Budget tabled on Wednesday afternoon in Parliament did not produce the fireworks that many feared, such as hiking VAT or personal income tax.
Personal income tax rates were not increased as was expected and as Nhlanhla Nene did last year, although about R18-billion more will be collected in 2016/17.
This will mostly be through yet another big increase of 30 cents per litre in the fuel levy as well as increases in capital gains tax, property transfer tax and an increase of about 7 per cent in the usual sin taxes (alcohol and tobacco).
It is expected for personal income tax will bring in 37.5 per cent of government revenue, company tax 16.9 per cent, VAT 25.6 per cent and fuel levies 5.5 per cent.
Sin taxes hike are as follows:
Beer 11c/340ml; fortified wine 27c/750ml; ciders and alcoholic fruit beverages 11c/340ml; unfortified wine 18c/750ml; sparkling wine 59c/750ml; spirits 394c/750ml; cigarettes 82c/packet of 20; cigarette tobacco 94c/50g; pipe tobacco 27c/25g; cigars 432c/23g.
South Africa will also brace for the first time have to face a sugar tax on April 1, 2017 to help reduce excessive sugar intake, which leads to diabetes and obesity.
Then there is also a tyre levy which will be implemented, effective October, 1 2016.
Gordhan also cracked the whip by announcing the expenditure ceiling will be cut by R25-bn over the next three years to bring the budget deficit down to 2.4 per cent of gross domestic product by 2018/19, and to stabilise debt.
Also important is that R31.8-bn has been reprioritised over the medium-term expenditure framework period to support higher education, the New Development Bank and other priorities.
Spending programmes over the next three years in addition include:
• R457.5-bn on social grants.
• R93.1-bn on transfers to universities, while the National Student Financial Aid Scheme receives R41.2bn.
• R707.4- bn on basic education, including R45.9-bn for subsidies to schools, R38.3-bn for infrastructure, and R14.9-bn for learner and teacher support materials.
The social grant increases are as follows:
• State old age grant from R1 415 to R1 505 per month.
• State old age grant for over 75s from R1 435 to R1 525.
• War veterans grant from R1 435 to R 1 525.
• Disability grant from R1 415 to R 1 505.
• Foster care grant from R860 to R890.
• Care dependency grant from R1 415 to R1 505.
• Child support grant from R330 to R350.
Gordhan stressed the need to implement a plan for stronger economic growth and cooperation between government and the business sector.
He also highlighted the government’s commitment to close the gap between spending and revenue.
This will hopefully keep the rating agencies that want to downgrade SA’s debt position to junk status temporarily at bay.
