- Capital-gains tax, property duties, fuel tax to increase
- Corporate, personal income tax, VAT rates are unchanged
Wealthy South Africans will bear the brunt of tax increases announced in a national budget that seeks to narrow the budget deficit and contain debt.
Capital-gains tax, transfer duties on expensive properties, fuel taxes, vehicle-emission taxes and excise duties on alcohol and tobacco products will all rise from April 1, the National Treasury said in the budget review, released in Cape Town on Wednesday. It also proposed new taxes on vehicle tires and sugar-sweetened drinks. The corporate and personal income tax rates and value-added tax stay unchanged.
“In view of the need to raise additional revenue and reduce the budget deficit, we have paid special attention to the fairness and inclusivity of the tax system,” Finance Minister Pravin Gordhan said in his budget speech to lawmakers in Cape Town on Wednesday.
South Africa is seeking to raise revenue and limit debt without stifling an economy forecast to expand at the slowest pace this year since the global financial crisis dragged it into a recession in 2009. The tax changes will increase the burden on the 7.1 million of South Africa’s 55 million people that pay income tax. A quarter of the workforce in Africa’s most-industrialized economy is unemployed and less than one million individuals account for 64 percent of income tax paid.
The state seeks to raise 1.32 trillion rand ($86 billion) in total revenue in the year through March 2017, 18 billion rand more than estimated in October, the National Treasury said. It expects to bring in an additional 15 billion rand in each of the next two fiscal years. Raising the 14 percent VAT rate is an option being considered.
While increasing VAT by one 1 percentage point could have raised an additional 20 billion rand, “at this stage it wasn’t necessary” because of the other measures, Cecil Morden, the Treasury’s chief director of tax policy, said in an interview.
The government raised the personal income tax rate last year, the first such move in more than two decades.
The higher excise duties and fuel levies will generate an additional 9.5 billion rand this fiscal year, while capital gains tax and transfer duties will contribute an extra 2 billion rand. Tax brackets won’t be adjusted to fully compensate for inflation, giving the government an additional 7.6 billion.
The main tax changes for the current fiscal year are:
* The maximum effective capital gains tax rate for individuals will be raised to 16.4 percent from 13.7 percent, while the rate for companies will increase to 22.4 percent from 18.6 percent.
* The transfer duty rate on properties worth more than 10 million rand will climb to 13 percent from 11 percent.
* Fuel taxes rise by 30 cents a liter.
* Excise duty on alcohol and tobacco products will rise as much as 8.5 percent.
* Oil refineries will be able to write off capital expenditure over three years, instead of five, as they upgrade to comply with new fuel specifications.