Cape Town - As expected, Minister of Finance Nhlanhla Nene raised taxes in his maiden National Budget.
Personal income tax rates will be raised by one percentage point for all taxpayers earning more than R181 900 a year. This raises tax by R21 a month for a taxpayer below age 65 with an annual income of R200 000.
Those earning R500 000 will pay R271 a month more, and at R1.5m a year the tax increase is R1 105 a month. The highest marginal tax rate has been raised from 40% to 41%.
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, Nene said in his speech in the National Assembly.
The current projection is that tax revenue will amount to R979bn in 2014/15, or about R14.7bn less than the budget estimate a year ago. Including non-tax revenue, social security funds and other receipts, and after deducting R51.7bn which goes to Southern African Customs Union partner countries, consolidated budget revenue will be R1 091bn this past year, or about 8.2 % more than in 2013/14.
The net effect of these proposals on 2015/16 tax revenue is an increase of R8.3bn, which will bring tax revenue for the year to R1 081bn, or about 10.4 % more than 2014/15 tax revenue.
Nene also announced a steep increase in the general fuel levy of 30.5 cents a litre, which will take effect April 1.With an even steeper raise of 50c in the Road Accident Fund (RAF) levy from the present levy of R1.04, it will mean a fuel price hike of 80.5c/litre over and above the normal montly adjustment of fuel prices.
The Budget Review states that the RAF levy had to be increased to support the RAD. The estimated overall fuel tax burden after this proposed increase will be about 41%, which according to the Budget Review is comparable with the level in many other developed and some developing countries.
Nene said in his speech that following recommendations of the Davis Committee, a more generous tax regime is proposed for businesses with a turnover below R1m a year. Qualifying businesses with a turnover below R335 000 a year will pay no tax, and the maximum rate is reduced from 6% to 3%.
To complement this relief, the South African Revenue Service (Sars) is establishing small business desks in its revenue offices to assist in complying with tax requirements.
Relief in property transfers
The rates and brackets for transfer duties on the sale of property will be adjusted to provide relief to middle-income households. The new rates eliminate transfer duty on properties below R750 000, while the rate on properties above R2.25m will increase.
Amendments are also proposed to the diesel refund system which applies to the agriculture, forestry, fishing and mining sectors.
Some of these changes will take effect this year and some in 2016, Nene said.
Nene also announced a number of a number of tax measures to promote energy efficiency, which will be discussed further with industry, the electricity regulator, Eskom and other interested parties.
The first proposal is a temporary increase in the electricity levy, from 3.5 cents per kilowatt hour to 5.5c/kWh, to assist in demand management. 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 45 c/kWh to 95 c/kWh, together with its extension to cogeneration projects.
Other measures under consideration include enhancing the accelerated depreciation for solar photovoltaic renewable energy. In the absence of a carbon tax, the electricity levy serves both to promote energy efficiency and encourage lower greenhouse gas emissions.
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.