Consumers to feel the pinch

2015-02-26 00:00

FINANCE ­Minister Nhlanhla Nene ­loaded consumers with more levies and taxes in yesterday’s Budget to stall a falling revenue base.

Although speculation of an increase in VAT did not materialise, he increased personal income tax by one percent — adjusted to affect wealthier people rather than the poor — while sin taxes were also once more increased to prop up the ­government coffers.

Nene said the weak economy had caused a slowdown in tax income from companies, value added tax and customs revenue.

“Apart from the one percent increase across the board in the income tax rate, overall the Budget announcements seem to be general adjustments and refinements rather than massive changes,” said Barry Visser, director: tax, at Grant Thornton.

“It is certainly not a good news Budget for consumers and higher-earning taxpayers, but they have managed to narrow their fiscal deficit and I am glad he really took aim at containing government spending too,” the accounting firm ­Deloitte said.

There was not much good news for the economy this year either — Nene said they had revised downwards their GDP growth forecast for 2015 to just two percent, compared with the 2,5% that National Treasury had projected last year.

And the positive effects to the economy of the lower fuel price of recent months have been watered down after Nene said the government will add 80,5 c per litre to the fuel price from April 1.

This is in addition to expectations of a normal increase in the fuel price of close to the same amount next week, due to rising global oil prices.

“Higher growth is possible, if we make good progress in responding to the electricity challenge or if export performance is stronger,” he said.

The 80,5 c per litre fuel price increase comprises a 30,5 c per litre increase in the general fuel levy, while an additional 50 c per litre will be taxed to rebuild the financial stand of the Road Accident Fund.

The government’s tax revenue came in R14,7 billion lower than it had anticipated in the budget last year.

Further cut-backs in the budgets of “non-critical” government activities have been proposed.

The one percent increase in personal tax rates for people earning over R181 900 per year means people below the age of 65 who earn less than R200 000 a year will pay R21 a month more in tax. Those earning R500 000 will pay R271 a month extra, while the tax for a R1,5 million a year income earner increases by R1 105 per month.

Nene also proposed a range of measures which he believes will help to stimulate the economy.

For instance, a surplus in the Unemployment Insurance Fund has meant that workers and employers will only each contribute R10 a month in the year ahead, putting R15 billion into the back-pockets of workers and businesses.

And to further support investment in the economy, Treasury estimates that R120 billion will have been contributed to the economy in 2015/16 through its tax expenditures or foregone revenue, to support its social or industrial policy strategies.

V Barry Visser

“Apart from the one percent increase across the board in the income tax rate,

overall the Budget announcements seem to be general adjustments and refinements rather than massive changes.”

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