The budget was always going to be an exercise in damage control. Minister Gordhan had been passed a hot potato that he had to juggle and somehow satisfy the ratings agencies, the taxpayers and citizens of South Africa in general. The budget in general seeks to achieve a balance between raising taxes and cutting expenditure. Both of these issues had to be dealt with very carefully given it is a municipal election year.
A key theme of this budget is that higher taxes are coming the way of the wealthy but most surprisingly this did not take the form of the suggested ‘super tax’. Instead higher Capital Gains inclusion rates for both companies and individuals (effective tax rates of 22.4% and 16.4% respectively) together with an increase in the annual amount above which capital gains become taxable were seen. Transfer Duty rates on ‘high end’ properties (above R 10 million) were also increased by 18% and measures were proposed to strengthen the estate duty and donations tax regimes.
Tax base broadening measures occupied centre stage. Minister Gordhan made it clear that time was running out for taxpayers who had undisclosed assets offshore. To assist taxpayers in regularising their tax and exchange control affairs he announced a special voluntary amnesty from October 2016 to March 2017.
There is a planned provision of R475 million to the Department of Small Business to provide assistance to small and medium sized businesses. We sincerely hope that this is spent on practical implementable measures and not social events in the form of ‘roadshows’.
As expected there was limited tax relief in terms of Personal Income Tax. This relief was mainly aimed at lower and middle income taxpayers. Whilst the marginal rate of tax was not increased across the brackets this year, there is the intention to introduce a ‘super tax’ bracket in the near future.
Very disappointingly the economic growth predicted for 2016 is 0.9%. Economists suggest that a growth rate of 3.5% would be necessary to pull the country out of the quagmire that it is in currently. With tax revenues projected to be R11.6 billion below the 2015 budget forecast, there are clearly tough times ahead.
The Capital Gains inclusion rate for individuals and special trusts increases from 33.3% to 40% and for other taxpayers from 66.6% to 80%. The annual exclusion for individuals and special trusts increases from R30 000 to R40 000.
Other proposals include:
- 7.3% (30 cents per litre) increase in the general fuel levy
- The introduction of a R2.30 per kg tyre levy to finance recycling initiatives
- A 50% increase in the incandescent globe tax
- A 33% increase in the plastic bag levy
- An 11-12% increase in the motor vehicle emissions tax
- The introduction of a tax on sugar-sweetened beverages with effect from 1 April 2017
- Increases in Sin Taxes of 6% and an 8.5% increase in the duties on alcoholic beverages and tobacco products
Further detail on the quantitative changes in the budget are available to download here.