Image Description

Finance Minister Nhlanhla Nene's first, highly anticipated national budget was considered, amidst much speculation – rather on the conservative side and shows government's intent to tighten its belt.

Rich South Africans will pay more tax, but not excessively more.

The only real surprise in the budget is the rise of the fuel levy, especially the levy of the Road Accident Fund.

How does it impact you?

Personal Tax
"Increase marginal personal income tax rates by one percentage point for all taxpayers earning more than R181 900, and adjusting tax brackets and rebates to account for fiscal drag."

There were very few changes in overall tax collections but the tax charge has been shifted to high income earners. The increased burden means less disposable income in the hands of the taxpayer which will hurt savings in SA, which is already a problem.

Corporate Tax
"Slowdown in business conditions means lower than expected company tax. Qualifying businesses with a turnover of below R335 000 a year will not pay tax."

The incentives are only for companies with a turnover of up to R1 million and do not benefit the bigger organisations which could, by paying less tax, possibly grow our economy by using the extra money to employ more people.

Fuel Levy
"Raise the general fuel levy by 30.5c/litre. The Road Accident Fund levy will also increase by 50c/litre, bringing total fuel levy increases to 80.5c/litre."

The total fuel levy increase of 80.5c per litre compared to last year's increase of 24c per litre, a 48% increase could have a major impact on the operating cost of businesses and ultimately the consumers, but one could say the timing of the Minister was good (or lucky) taking into account the large decrease in the fuel price over the last few months. Therefore he is starting from a much lower point than last year. Furthermore with the estimated increase of 90c per litre in March this will basically put business and consumers back where they were before the major price decreases due to the low oil price, thus absorbing the 48% increase in total fuel levy.

The increased cost equals less taxable income and less money for companies/business to grow. This will also impact competitiveness of running a business when the oil price returns to high levels. The recent benefits of the reduction in global oil prices have been short-lived for SA motorists.

Electricity Levy
"Raise the electricity levy from 3.5 c/kWh to 5.5 c/kWh temporarily, to manage the electricity shortage"

This will burden businesses even more, although amounts are recycled through Energy Efficiency savings allowance. In the long run this increase will discourage foreign investment into SA.

Transfer Duty Rates
"Change transfer duty rates and brackets to provide relief for middle-income households. Property of up to R750 000 will now be exempt from transfer duty."

Transfer duty increase is significant as properties over R2.3 million are now subject to a higher transfer tax and this isn't good for our property market, which as it stands has high rates by world standards, and is already struggling to recover.

Wealth
"Increased investment allowances from R4 million to R10 million."

For high net worth individuals this means increased opportunities for overseas investment and allows South Africans to diversify their international investment portfolios.

Sin Taxes

"Sin" taxes have been hiked with smokers contributing an extra R600m and alcohol drinkers R1.2bn in the year ahead. The tax on a quart of beer goes up by 15.5c, a bottle of wine will cost 15c more, a bottle of sparkling wine goes up by 48c, a bottle of whisky will be R3.77 more and (I would use “and” instead of a semicolon as it is the last point) a pack of 20 cigarettes goes up by 82 cents.

Want to read more? Click here and here.

And if pictures are more your thing – herewith an infographic, compliments of Deloitte.