South Africans are now preparing for a host of new tax measures that will take effect from 1 April 2018, with the VAT hike to 15% to make the biggest impact on day-to-day finances, but how exactly will this affect our pockets?
Old Mutual has published a new assessment on how South Africa’s new taxes will impact your personal finances from next month onwards.
There will be a rise in the shelf price of consumer goods, a rise in fuel levies and sin taxes, as well as a new ‘health promotion’ tax to kick in next month.
In an in-depth analysis by Old Mutual, the group breaks down how VAT increases will impact various financial policies, and how other tax measures such as the new estate duties tax, will come into play.
Among the finer financial assessments, the group published tables on how the monthly and annual salary of South Africans will be affected by the new tax brackets. The new brackets were announced during the annual Budget Speech at the end of February.
Despite no changes being announced with regards to marginal tax rates, the effect of fiscal drag means that incomes will reduce after inflation. Fiscal drag refers to the higher proportion of tax being deducted as wages rise.
The tables below show the impact for South African taxpayers based on different income levels, including the % reduction which can be compared to inflation to understand the real impact.
The National Treasury will raise almost R7-billion rand from the personal income tax system through the lower-than-inflation increases to tax rebates and brackets. Effectively, this will allow the National Treasury to collect taxes by stealth.
However, it was also acknowledged that further tax hikes in personal income tax could be counterproductive.
South Africa’s personal income tax burden has increased from 8.3% GDP in 2010/11 to 9.8% in 2017/18.