One of the big surprises for investors in the National Budget Speech was the decision to reintroduce dividend tax in place of STC at a rate of 15% versus an expected 10%, which is anticipated to bring R5.5bn during the forthcoming fiscal year. Another surprise was government’s announcement to raise capital gains tax to an effective 13.3% from 10% bringing in an anticipated R1.2bn.
Exemption rates have been raised to limit the impact of the increase in CGT on middle-income earners.Other news that is likely to impact on the health industry was the announcement that government intends phasing in National Health Insurance over the next 14 years and the publication of initial details on funding requirements.
Government is also committing to limiting public wage increases to 7%. Therefore, some of the income tax relief provided is likely to be offset by real wages not increasing at the same breakneck pace as the previous five years.
There is renewed commitment to accelerate infrastructure spend and it seems that Transnet will be receiving considerable support for its capex plans. The tolling of roads will also go ahead .
Good news for the financial services industry was Treasury’s plans to encourage greater savings by moving away from current tax-free interest income caps towards tax-preferred savings and investment accounts on which savers would not pay tax up to a certain limit a year. The Minister also detailed plans to incentivise employees to save for retirement by setting individual taxpayer deductions at 22.5% and 27.5% for those below 45 years and 45 and above respectively effective March 1, 2014.
To limit businesses incurring excessive debt, Treasury also intends reclassifying rules deeming certain debt to be equivalent to shares.
Treasury also raised the petrol general fuel levy (20c/l) and electricity (1c/kWh to 3.5c/kWh) levies, which is likely to add to company cost pressures even though it expects the impact of the electricity levy to be neutral because it replaces the current funding mechanism that is incorporated into Eskom’s annual tariff application.