| As tax revenues fall and expenditure demands increase, including further subsidies for higher education, Finance Minister Pravin Gordhan will be looking for an additional R43 billion in taxes over the next two years. Of this amount, R28 billion will be raised next year.
While we’ll have to wait for the February 2017 Budget Review to find out exactly which taxes will rise, in the 2016 Budget Review the National Treasury gave some indication of where this money could come from, including: “providing limited relief for fiscal drag, increasing marginal personal income tax rates, introducing a new personal income tax bracket, and raising the VAT rate and/or increases in other taxes. These options will be the subject of further analysis, consultation and debate”.
The National Treasury will need to consider the various options to ensure that an unfair burden does not fall on lower-income earners or extract significant growth from the economy, but ultimately, we will all be paying more tax next year.
Value-Added Tax (VAT): R15 billion
The Davis Tax Committee’s research found that an increase of VAT from 14% to 15% would generate an additional R15 billion.
What you can do: Spend less. VAT is only charged when you spend money, so rather save it and pay less to the taxman. From a daily living perspective, note the staple items that are zero-rated for VAT purposes and buy more of them and less fast food/readymade foodstuffs. Examples of VAT-exempt foodstuffs include brown bread, eggs and milk.
Fiscal drag: R7,6 billion-R13,1 billion
The National Treasury adjusts the tax tables annually to allow for inflation-based salary increases. In the 2016 Budget, if Treasury had not adjusted the tax tables it could have raised an additional R13,1 billion. It did allow for some adjustment but not fully, resulting in a net tax increase of R7,6 billion.
What you can do: You can pay less income tax by increasing your contributions to a retirement fund, including a retirement annuity. Remember that you can invest up to 27,5% of your salary before tax.
Sugar tax: R11 billion
There’s still a great deal of debate about a possible sugar tax and also some disagreement around how much revenue it would actually raise. The figure of R11 billion currently on the table may be overstated, but even at half that amount, it would generate a significant boost to tax revenue.
What you can do: Adjust your diet. Sugar is not good for anyone and drinking fewer sugary drinks will improve your and your family’s health and help save money. Did you know that the average soft drink contains around nine teaspoons of sugar? Imagine eating that amount of sugar!
Levies: R9 billion
The usual increases to fuel levies and so-called ‘sin’ taxes would generate an additional R9 billion.
What you can do: We currently pay R4,43 per litre of petrol for the various levies, so finding ways to use fuel more efficiently or to car-pool will save on tax. Drinking and smoking less are other ways to lower your total tax bill, although in stressful economic times these are usually the sins we indulge in!
Wealth taxes: R3 billion-R5 billion
As discussed in previous newsletters, the Davis Tax Committee also made several recommendations to restructure tax policy around trusts, estate duty and donations between spouses. The aim is to increase tax collection on inter-generational wealth transfers. These taxes would increase tax revenue by between R3 billion and R5 billion per annum.
What you can do: First of all, don’t panic! There is no hard and fast legislation in place yet, only proposals, which may or may not become law. Adopt a sensible approach to estate planning and establish your actual needs. Ensure that those actual needs are reflected in the estate-planning tools you’ve used to meet them, and ensure that you have sufficient cash in your estate to provide for any taxes that may result. Consult with an appropriately qualified financial adviser to guide you in this process so that you have a flexible plan that can be adapted for the changing environment.
Personal income tax: R3,5 billion
The Davis Tax Committee showed that an increase in the marginal tax rate of individuals earning more than R1,2 million a year to 45% would generate an additional R3,5 billion.
What you can do: This tax increase would only affect the top income earners. High-income earners can increase contributions to retirement funds, but keep in mind that this is capped at R350 000. You can also consider making donations to public benefit organisations. |
