How the budget affects you – Jabulani: Unseen taxes add up

2012-02-25 09:13

Jabulani is 23 years old and is earning R5 500 a month.

He doesn’t have a family – wife and children – of his own and entertainment is high on his list of priorities.

“Well, I am going to pay R685 less income tax a year. In fact, I will only pay something like R20 tax a month so I am happy,” he laughs. But what Jabulani may not realise is how much tax he is paying indirectly.

He will pay 54c more on a six-pack of beer and for every 750ml beer he buys, R1 goes to the taxman.

On his pack of cigarettes, he is paying R10.32 in tax. His pack-a-day habit is adding R309 a month to the government’s revenue.

“I need to work it out, but I don’t think these taxes will stop me from partying, I am more worried about the petrol price,” he said.

The 2012/13 budget announced a massive 20 cents per litre increase in the fuel levy and a further eight cents increase per litre for the Road Accident Fund. Add this to the recent petrol price increase and transport costs are going to rise.

“I catch a taxi to work and I am worried they (taxi owners) are going to increase my fares again. That is a big part of my budget.”

Jabulani is going to benefit from the change in tax treatments for medical contributions.

From March 1, tax deductions for medical schemes will be converted to a tax credit.

The reason for this change is that tax deductions favour higher income earners while a tax credit is more equitable.

Under the previous system of a tax deduction, a person who paid tax at the marginal rate of 40% received a tax deduction of 40% on their medical scheme premium (to a capped amount) while a person with a marginal rate of 18% received only an 18% deduction.

The monthly tax credit rate for members of medical aid schemes for the 2012/2013 tax year will be R230 for the first two beneficiaries and R154 for each of the dependent.

Since Jabulani pays R300 a month for his medical scheme, he will receive a tax credit of R230 which is equal to 77% of his medical aid contribution.

“I do feel though that my taxes work for me especially with my unemployed family,” said Jabulani about what Finance Minister Pravin Gordhan called “the social wage”.

In his budget speech, Gordhan said that the “social wage”, which is how much of the budget government spends on social grants, education, health care and free electricity to poorer households, works out at R3 940 per month for a family of four.

Jabulani is, however, disappointed that there was no mention of the youth wage subsidy.

“The government needs to find ways to help young people to find jobs,” he said.

“I am fortunate to have a job but my younger brother is still unemployed and it is very difficult for him to find work.”

Jabulani’s direct contribution to taxes: R7 383
Personal tax: R260
Valued-Added Tax: R2 719 (30% of his after-tax income is spent on VAT-able items)
Sin taxes: R4 404 (a pack of cigarettes and two beers a day)

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