On 21 February 2018, Finance Minister Malusi Gigaba delivered the annual budget speech.
Following President Ramaphosa’s State of the Nation Address theme of hope and renewal, Gigaba placed key emphasis on the risks that have been a centre of concern for the South African economy.
These are the tax proposals set out in the speech:
Value-added Tax
VAT has increased from 14% to 15% and will take effect from 1 April 2018. This increase will affect 80% of higher income earners. Zero-rating food, such as brown bread, will remain VAT-free.
Personal Income Tax
The personal income tax of those earning between R0 – R555 600 per annum will remain unchanged, while those who earn more than R555 601 per annum will be affected by 3.1% increase. Primary, secondary and tertiary rebates are partially increased for inflation.
Estate Duty and Donations Tax
Estate Duty rates have increased by 5% on dutiable estates in excess of R30 million. The same percentage increase is applicable on donations of more than R30 million.
Estate Duty above R30 million was 20% will now be 25%. Same for Donations over R30 million.
Sin Tax
Will be increased by 6 – 10%. Tobacco will increase by 8.5%. The below table details the increase:
Excise Duty
Due to take effect as of 1 April 2018, the maximum ad valorem excise duty for motor vehicles and luxury goods will increase from 7% to 9%.
Fuel and Road Accident Fund Levy
On 4 April 2018, the General Fuel Levy will increase by 22 cents per litre, and the Road Accident Fund Levy will increase by 30 cents per litre.
Social Grants
Lower income households will be financially relieved through an increase in social grants. The grant increase will be effective as of 1 April 2018.
On 1 October 2018, these grants will increase by a further R10, taking the disability, care dependency and old age grants to R1 700, and the child support grant to R410.
Environmental Taxes
The Department of Environmental Affairs is due to publish a policy regarding the scope of environmental reform. Levy on plastic bags, vehicle emissions tax and the levy on light bulbs will be raised to promote eco-friendly choices.
Corporate Income Tax and Dividends Tax Rates
These have remained the same for the 2018 budget at 20%.
General Points:
1. The increase in VAT and the change in personal income tax will result in an additional R36 billion being raised through these measures.
2. The question of higher education has been answered by this speech, and government has allocated R57 billion for free education. NSFAS loans that have already been granted in 2018 will be converted to bursaries.
3. A 1.5% growth in GDP is anticipated for 2018.
4. Consumer inflation is expected to decline to between 5.3% and 5.5% in the years 2017 to 2020.
5. Sin Tax and General Fuel Levy will raise revenue of R2.6 billion.
6. A health promotion levy, which taxes sugary beverages, will be implemented form 1 April 2018.