Before the end of February each year the Finance Minister of South Africa passes a budget speech. In Minister Tito Mboweni‘s maiden budget speech he was left with little fiscal room to manoeuvre.
At CFO360 we like to give you a quick update on the highlights of the budget speech and how it applies to you:
- No changes to income tax brackets except by raising the tax-free threshold from R78 150 to R79 000. This is an effective tax increase as no inflationary adjustments are made.
- Carbon Tax to be implemented from 5 June 2019. This will be in the form of a levy on Petrol and Diesel of 9c and 5c respectively, effective 5 June 2019.
- Fuel and Road Accident Levies of 15c per litre and 5 c per litre respectively, effective 3 April 2019.
- The usual increase of excise taxes on Tobacco and Alcohol Products
- White Bread Flour, Cake flour and Sanitary Pads will be Zero-rated for VAT purposes from 1 April 2019.
- ETI will be increased from 1 March 2019
As has been said the Finance Minister Tito Mboweni was effectively between a rock and a hard place. With an election coming up in May 2019, there was no expectation of any major changes, and certainly not any tax increases on the consumer or significant cuts on the Governments expenditure.
However, by not increasing the effective tax bracket income bands the Finance Minister has handed all income earners in South Africa an effective inflationary tax increase of 4.7%(4.7% on the tax you currently pay, not 4.7% on income) for all but the lowest earners who were given a mere 1.1% of relief.
As has been discussed over the last couple of years, government has finally implemented a Carbon Tax. This will be in the form of a Fuel levy, for all intents and purposes the same as the General Fuel levy as this will be paid for by each and every consumer directly or indirectly.
On the spending side the Government has managed to eke out R50.3 billion of spending reductions, mainly from compensation related adjustments. I suspect the government will have their work cut out dealing with the powerful Labour factions in South Africa to bring those cuts to fruition.
Finally, the Finance Minister has had to made some significant allocations to Eskom, the state Utility amounting R69 billion as well as an additional R6 billion to other SEO’s. While a hard pill to swallow, this is a necessary allocation and as country, South Africa needs a reliable electricity supply.
All in we have been given a budget with inflationary increases, but thankfully combined with a cut in Government spending. We have not been given any tax surprises such as higher capital gains or estate taxes.
If you have any questions, please don’t hesitate to contact your accountant directly.
For the full budget information you can follow the following links:
If you have any general queries, do not hesitate to contact us.