Taxes that will hit your pocket

Pravin GordhanIn his 2017 budget speech, finance minister Pravin Gordhan announced increased tax revenues of R28 billion, the bulk of which will come from increased personal income tax and higher dividend tax, avoiding the politically sensitive issue of an increase in VAT.

  • 16.5bn more personal income tax: Although National Treasury announced a new tax bracket of 45% on individuals earning more than R1.5 million, as well as trusts, this will only provide R4.3bn in additional revenue. The bulk of the increased personal tax revenue will come from “bracket creep” as the personal income tax tables will not be fully adjusted for inflation, reducing real income. In other words, after your inflation-adjusted salary increase is taxed, the amount of goods and services you can afford this year will be reduced.
  • 6.8bn more tax on investments: Dividend withholding tax will be increased significantly from 15% to 20%. Although Treasury argues that this was necessary to close the arbitrage gap as the top bracket earners could switch to dividends in lieu of salary, it has the desired effect of raising an additional R6.8bn in revenue. This makes tax-free investments such as retirement funds and tax-free savings accounts more attractive with the annual contribution rate for TFSA lifted to R33 000.
  • 3.1bn more tax on fuel: Treasury announced a significant increase in the fuel levy of 30c/l; this combined with the 9c/l Road Accident Fund levy means that for a 50 litre tank of petrol you will pay an extra R19.50, raising R3.1bn in additional tax. As from 5 April 2017 motorists will pay a total of R2.85 tax for every litre of petrol or R142.50 per tank of petrol.
  • 1.9bn more tax on sins: The usual sin taxes on alcohol and cigarettes will see you paying R1.06 more for a pack of cigarettes with R14.30 going to government for every pack of cigarettes you purchase. A bottle of wine will cost 23c more and a pack of beer 66c more.
  • Zero sugar tax, for now: National Treasury is still waiting for legislation to be approved by parliament but once it is approved, the proposed tax rate will be 2.1c/gram of sugar on beverages with more than 4g/100ml. Once passed, a can of coke would cost around 82c more.
  • R448 million less tax on property transfer: In one of the few positive stories in this year’s budget for taxpayers, the duty-free threshold on the purchase of residential property will be increased from R750 000 to R900 000.

 This article first appeared on the City Press website.