Finance Minister Malusi Gigaba delivered his maiden 2018 Budget to Parliament on Wednesday and in a tough decision has increased the Value Added Tax (VAT) rate by one percentage point to 15%. Gigaba said that this move was was unavoidable.
Currently South African’s contribute about 37% of the gross to tax revenue, and have noted big increases in tax rates over recent years.
He said in his opening address, “We stand before you with a profound sense of optimism, purpose and resolve. South Africa can achieve the growth needed to address unemployment, poverty, inequality and relieve pressure on the fiscal framework.”
Gigaba said the budget presented today is not easy and the choices made have been difficult.
Sin tax has increased and will raise R36-billion in revenue for the 2018/2019 financial year. Excise duties will also increase by 6-10%, and will bring in an estimated R1.33-billion in revenue for the financial year. On average, excise duties will by 10% on a 340ml can of beer, cider or alcoholic fruit beverage. This means the price of one of these will increase from 146.9c to 161.5c. African beer will remain at it’s current price of 7.28c per liter. Those who enjoy wine will also be paying 30c more per liter, and duties will increase from R3.61 to R3.91 per liter. The tax on spirits will also increase by R190.08 per liter of absolute alcohol, and this will result in an increase of R61.30 in excise duties per 750ml bottle. Those who smoke will have to pay R15.52 in tax for each box of 20 they purchase, which is an 8.5% increase from the current rate of R14.30 per box. Excise duties on tobacco will also increase by 8.5%, from R16.07 per 50g to R17.44. Cigars will also be taxed at 8.5% per 23g, which is R82.31.
Treasury has allocated an additional amount of R57-billion to the department of higher education and training in order to fund free university education for qualifying students. Government will hold off on some of its capital projects and reduce spending on goods and services in order to find R57-billion to fund free tertiary education. Over the medium term, R3.8 billion allocated to the School infrastructure backlogs grant will replace 82 inappropriate and unsafe schools, and provide water to 325 schools and sanitation to 286 schools. Government will phase in fee-free higher education and training to students from poor and working-class families.
To strengthen global market access for South African agricultural products the Department of Agriculture, Forestry and Fisheries received an additional allocation of R40 million over the MTEF to upgrade infrastructure and equipment for analytical services laboratories.
The Old age, disability and care dependency grants will increase on 1 April 2018 from the existing R1600 by R90 to R1690 and by a further R10 to R1700 on 1st October 2018.
An estimated R581.7 million is expected to be reprioritised for the black producer commercialisation programme. By creating opportunities for black agricultural producers, we are radically transforming the agricultural sector of our economy. Accelerating land reform has become urgent and the Department of Rural Development and Land reform has set aside R4.2 billion for the acquisition of about 291 000 hectares of strategically located land.
Over the medium term, the NHI is allocated an additional R4.2 billion, funded through an amendment to the medical expenses tax subsidy
A provisional allocation of R6 billion has been set aside in 2018/19 for several purposes, including drought relief and to augment public infrastructure investment. Government is concerned by the potential job losses in vulnerable farming communities as a result of the drought. We are therefore exploring the option of partially mitigating losses by temporarily increasing intake in the Working for Water programme. To provide short term assistance, this budget includes disaster relief grants for provinces and municipalities worth R473 million in 2018/19.