Guiding consumers since 2009

Tax hike to be announced by Pravin say experts

By Staff Writer
Nicolette Dirk, finance writer, Justmoney.co.za
 
Tax experts say consumers should brace themselves for a potential increase in income tax or VAT, which could be announced by  Finance Minister Pravin Gordhan when he delivers his 2014/2015 Budget Speech this month.
 
According to Ettiene Retief, tax expert and chairman of the National Tax Stakeholders Committees at the South African Institute of Professional Accountants (SAIPA), South Africans must face the harsh reality that taxes will have to be increased, because the country can’t borrow more without further negative impact.
 
What now?
 
Retief said the country’s income has reduced due to increased inflation, decreased foreign stimulis, trade deficits, and the weakening currency. This results in reductions in consumer spend leading to reduced income from VAT on purchases, as well as a reduction in production which, in turn, leads to job losses and labour unrest.
 
“We have recently seen record levels of retrenchments and job losses, a standstill in platinum production although South Africa is responsible for 77% of the global platinum production, and construction industry is still only managing to stay afloat,” said Retief.
 
He pointed out that the country’s income has reduced, costs cannot be cut in line with the loss, and borrowing has become increasingly risky. Increasing the deficit has impacted negatively on the strength of the rand, inflation and foreign investment.
 
What should taxpayers expect?
 
Retief said that South African taxpayers should expect tax increases in the short to medium future. Because corporate tax only has an impact on the fiscus after a year of trading, making changes to consumption and individual income taxes are lot more feasible for short term impact. 
 
Marc Sevitz co-founder of online virtual tax assistant tool TaxTim agreed that raising taxes is a possibility but he added that it’s a sensitive issue.
 
“An increase in the 40% capped bracket will not be well-received because South Africans are already overtaxed. The country’s budget deficit has increased and the country’s economic growth was not as high as the Minister predicted,” said Sevitz.
 
Retief warned that although individual tax in South Africa is currently capped at 40%, taxpayers should not expect this to be the case for very much longer. 
 
“Increased government lending will affect inflation and economic stability, just delaying the inevitable increased tax pressure on individuals. An increase in the individual income tax ceiling might seem like the least desired change but this increase will actually only affect a small portion of the population, being the high income earners, whose spending habits have historically not been significantly affected by tax changes over the past few years,” said Retief.
 
Value Added Tax could go up
 
Retief added that international trends dictate that VAT of 14% is relatively low, and Minister Gordhan could increase VAT to 15%. But Sevitz predicted that this would be a risky move, especially in an election year because raised VAT would impact the population, meaning the richest to the poorest will feel the brunt.
 
How to cope with possible tax increases
 
Retief said that even if none of these predictions are realised, recent increases in living costs dictate that consumers have no choice but to change their instant gratification spending habits.
 “The delayed gratification of sufficient savings has a lot more longevity, and offers more security, than the fleeting satisfaction of “keeping up with the Joneses’” by spending money you don’t have on status items,” said Retief. 
 
He further urged consumers not to spend in ways that are not sustainable.  
“It is most probably not the last time that we will see an increase in rates and fuel costs. Every individual must take responsibility for their own spending habits. That is not the job of government, despite the various consumer protection laws,” he said.

Recent Articles

Featured How to choose the right loan for your unique needs

You may find yourself in a situation where you’d like to take out a loan. But did you know that there are different kinds of loans, and that one loan is not suitable in all instances?

Do this if your credit score is negatively impacted by creditor error

Let’s say you pay your monthly instalment at your local branch. But the payment, which went through on your side, didn't show up on your creditor’s side. So they may report you to the credit bureaus and your credit score can be negatively impacted.

A guide to saving after retirement

Everyone knows that saving for your retirement is good for many reasons, such as not having to depend on social grants or your family, and sustaining the quality of the life you’re leading.  However, many people think that once they retire there’s no need to continue saving. However, life doesn’t stop at retirement and you may still have decades of life to enjoy.

Try these ventures to earn a passive income

It’s sound financial sense to have more than one stream of income. By setting up a passive stream of income, you’ll earn more each month without having to dedicate too much extra time.

Deals

Get 10 pieces of chicken for R75 at KFC

Price: R75
When: Tuesdays
Where: Nationwide

Debonairs Get 2 for Iklipa Special

Price: R99.90
When: Daily
Where: Nationwide

Indaba Hotel Christmas Lunch Special

Price: R595
When: Until 25 December 2020
Where: Johannesburg


Latest Guide

Guide to debt rehabilitation solutions