Budget 2016: tax hikes likely

2016-01-06 06:00

SOUTH Africans are collectively holding their breath for further tax hikes when Finance minister Pravin Gordhan delivers his 2016 Budget Speech.

In the 2015 Budget Speech, former Finance minister Nhlanhla Nene increased personal income tax for all taxpayers earning more than R181 900 a year.

He also announced an increase in the general fuel levy of an additional 30,5c per litre and a 50c per litre rise to subsidise the Road Accident Fund.

A further increase in personal income tax in 2016 will have a negative impact on middle-income earners who are already buckling under significant tax pressures.

But with an ever-widening budget deficit, a poor economic growth outlook and two downgrades in South Africa’s credit rating, Gordhan is expected to have little choice but to introduce some kind of tax rise.

To make matters worse, National Treasury needs to fund a R2,3 billion shortfall for tertiary education since President Zuma introduced zero percent increase in tuition fees this year.

The Davis Tax Commission, tasked with looking at an overhaul of the country’s taxation system, said in a report that of the three sources of tax - corporate, personal income and consumer tax - value-added tax (VAT) would be the least disruptive to employment and economic growth.

Tax experts agree, saying a one percentage point increase in VAT is levied across a broader base, and could raise more revenue than other taxes.

As with every year, National Treasury is expected to raise sin taxes on alcohol and tobacco products, while a further increase in the fuel levy and a higher contribution to the Road Accident Fund is also on the cards. - Fin24.

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