"As I indicated in the Medium Term Budget Policy Statement in October, even after lowering our expenditure ceiling and taking into account the need for sustainability in managing our debt, there is a structural gap between our revenue requirements and projected tax proceeds. To bridge this gap we require additional revenue," explained Nene in his speech.
He added: "However, tax brackets, rebates and medical scheme contribution credits will be adjusted for inflation, as in previous years. The net effect is that there will be tax relief below about R450 000 a year, while those with higher incomes will pay more in tax."
In the run up to the budget, economists and other commentators widely expected the 'rich' to be taxed more on their income. But it appears the government has chosen to spread the 'pain' a bit more evenly among mid and high income earners instead of just isolating high income earners to pay more tax.
The new tax rates payable for the tax year ending 29 February 2016, will apply in the following way:
|Taxable income of individuals (R)||Tax payable (R)|
|0 to 181 900||18% of taxable income|
|181 901 to 284 100||32 742+26% of taxable income above 181 900|
|284 101 to 393 200||59 314 + 31% of taxable income above 284 100|
|393 201 to 550 100||93 135 + 36% of taxable income above 393 200|
|550 101 to 701 300||149 619 + 39% of taxable income above 550 100|
|701 301 and above||208 587 + 41% of taxable income above 701 300|
|Trusts other than special trusts||Rate of tax 41%|
Source: National Treasury as at 25 February 2015
The rate changes will result in taxpayers with an annual taxable income of R200, 000 a year paying about R21 more in monthly taxes. Those earning R500, 000 will pay an extra R271 a month and those earning R1.5 million will pay an extra R1, 105 a month.
Motorists to feel the pinch
Motorists will pay more too, as the general fuel levy will be raised by 30.5 cents per litre. The Road Accident Fund level will also increase by 50 cents per litre, bringing the total fuel levy increases to 80.5 cents a litre. Government said these levies aim to raise revenue, reduce pollution and compensate for road accidents.
Motorists were granted a brief hiatus as the price of petrol came down recently. But this saving on fuel will be a short lived one.
The tax proposals (excluding the RAF fuel levy) will add R16.8 billion to revenue in 2015/16, offset by relief for inflation-related earnings increases amounting to R8.5 billion.
Sin tax increases
Every year tax on 'sins' (cigarettes, wines, sparking wines, whisky and beer) goes up. This year was no different. The tax on a quart of beer goes up by 15.5 cents, a bottle of wine will cost 15 cents more, a bottle of sparkling wine goes up by 48 cents, a bottle of whisky will be R3.77 more, while a pack of 20 cigarettes goes up by 82 cents.
For those that are looking to buy a home there is some relief, but this is only applies to those who are not purchasing expensive homes. "The rates and brackets for transfer duties on the sale of property will be adjusted to provide relief to middle-income households," said Nene. "The new rates eliminate transfer duty on properties below R750 000, while the rate on properties above R2.25 million will increase."
Nene explained that unlike the Road Accident Fund the UIF has an accumulated surplus of over R90 billion and that there will be temporary relief to both employers and employees. "The proposal is that the contribution threshold should be reduced to R1 000 a month for the 2015/2016 year. This means that employers and employees will each pay R10 a month during the year ahead, putting R15 billion back into the pockets of workers and businesses," said Nene.
Paying more for electricity?
Finally, despite the problems with Eskom and the intermittent load shedding homeowners could be paying more for their electricity as Government is considering an increase in the electricity levy from 3.5c/kWh to 5.5c/kWh. "This additional 2c/kWh will be withdrawn when the electricity shortage is over. Secondly, an increase is proposed in the energy efficiency savings incentive from 45c/kWh to 95c/kWh, together with its extension to cogeneration projects. Other measures under consideration include enhancing the accelerated depreciation for solar photovoltaic renewable energy."
"The introduction of a carbon tax in 2016 will provide an additional tool to deal more sustainably with the current electricity shortage, while lowering the electricity levy. A draft carbon tax bill will be introduced later this year for a further round of public consultation," said Nene.