Taxpayers be warned
Tj Strydom | 25 February, 2014 00:44
http://www.timeslive.co.za/thetimes/2014...-be-warned
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Four of every five income-tax rands come from a small pool of only 1.7-million people, the mostly middle class who are already under pressure financially and unlikely to get any breathing space soon.
Though most economists do not believe Gordhan will raise income taxes directly, the Treasury has a few tricks up its sleeve.
Apart from steep increases expected in the so-called "sin taxes" levied on alcoholic beverages and tobacco products, the middle class should brace itself for a few other hikes.
"We will probably see the fuel levy go up again by a few cents," said the economic researcher for the Solidarity union, Paul Joubert.
This is despite the petrol price having increased by nearly 14% since Gordhan gave his last Budget address to parliament a year ago and the fiscus pocketing about half of what motorists pay at the pumps.
The petrol price is to increase again next week, by more than 30c, according to statistics from the Central Energy Fund.
In the past decade the levy had mostly been pushed up, with only a slight pause in 2008, according to Joubert.
He expects the same will happen with levies on tyres and new vehicles and that middle-class consumers will bear the brunt of this.
South Africa had nearly 14million registered payers of income tax last year, but the overwhelming majority of the tax revenue comes from a much smaller pool of people.
Solidarity's research shows that 3.7million people paid 96% of all income tax. And even in this smaller group, a million people contributed very little - so that, in fact, 2.7million South Africans shoulder 90% of the burden (and 1.7million forking out 80%).
"Like being a member at a gym. Just because you're registered, doesn't necessarily mean you will be active," Joubert said.
Old Mutual Investment Group economist Rian le Roux said big tax changes were unlikely in this year's Budget, though he would not rule them out completely.
A commission appointed by Gordhan last year to review the tax system was still busy with its work.
"The . ministry is unlikely to enact any major changes with the commission work still not finalised," said Le Roux.
Even if this means that the income tax rate does not go up, taxpayers are not necessarily out of the woods.
According to Joubert, Gordhan's announcement of "tax relief" to the tune of R7-billion last year actually amounted to a veiled increase because "bracket creep" was allowed to gnaw away at consumers.
"For the 2013/14 tax year the tax threshold was increased by only 5.6%, while the thresholds of the other tax brackets were increased by 3.5%. As those increases were lower than the prevailing inflation rates, these adjustments, in fact, brought about a heavier tax burden and did not constitute relief," he said.
Only if one's income remained unchanged would the tax break have amounted to relief.
Sanisha Packirisamy, an economist at Momentum Asset Management, said yesterday that there was potential for some allowance for bracket creep at the middle to lower end of the consumer market.
Gordhan might increase income tax rates for higher-income earners or, possibly, even effect a rise in the value-added-tax rate, she said.
"However, we see this as being more of a risk next year, given that this is an election year."
The unexpected interest rate hike last month was also putting pressure on middle-class consumers, she said.
Joubert agreed and added that the middle class was being squeezed from all sides and could, in fact, be double-paying for many services.
"That is why we approached the Treasury to allow private security costs to be tax-deductible, but after initial discussions we have not heard anything from them," he said.
Most economists expect Reserve Bank governor Gill Marcus to push up repo rates again next month as inflation expectations are still uncomfortably high.
Happy 100th tax birthday
-National income tax was instituted in 1914, in what was then the Union of South Africa, according to Solidarity. Before the introduction of income tax state revenue came mainly from trade levies, user fees, indirect taxes and mine taxes.
-In 2012-2013 personal income tax contributed 34% of the state's tax revenue.
-In 1914, income tax was levied on income greater than £1000 a year based on a sliding scale starting at 6d per pound (or 2.5%). The first £1000 was not taxable.
-With the sliding scale adjustment, the effective income tax rate on £2000 was 1.35%. Someone with an income of £25000 a year had to pay only 7.2% in income tax.
Source: Solidarity
Tj Strydom | 25 February, 2014 00:44
http://www.timeslive.co.za/thetimes/2014...-be-warned
Four of every five income-tax rands come from a small pool of only 1.7-million people, the mostly middle class who are already under pressure financially and unlikely to get any breathing space soon.
Though most economists do not believe Gordhan will raise income taxes directly, the Treasury has a few tricks up its sleeve.
Apart from steep increases expected in the so-called "sin taxes" levied on alcoholic beverages and tobacco products, the middle class should brace itself for a few other hikes.
"We will probably see the fuel levy go up again by a few cents," said the economic researcher for the Solidarity union, Paul Joubert.
This is despite the petrol price having increased by nearly 14% since Gordhan gave his last Budget address to parliament a year ago and the fiscus pocketing about half of what motorists pay at the pumps.
The petrol price is to increase again next week, by more than 30c, according to statistics from the Central Energy Fund.
In the past decade the levy had mostly been pushed up, with only a slight pause in 2008, according to Joubert.
He expects the same will happen with levies on tyres and new vehicles and that middle-class consumers will bear the brunt of this.
South Africa had nearly 14million registered payers of income tax last year, but the overwhelming majority of the tax revenue comes from a much smaller pool of people.
Solidarity's research shows that 3.7million people paid 96% of all income tax. And even in this smaller group, a million people contributed very little - so that, in fact, 2.7million South Africans shoulder 90% of the burden (and 1.7million forking out 80%).
"Like being a member at a gym. Just because you're registered, doesn't necessarily mean you will be active," Joubert said.
Old Mutual Investment Group economist Rian le Roux said big tax changes were unlikely in this year's Budget, though he would not rule them out completely.
A commission appointed by Gordhan last year to review the tax system was still busy with its work.
"The . ministry is unlikely to enact any major changes with the commission work still not finalised," said Le Roux.
Even if this means that the income tax rate does not go up, taxpayers are not necessarily out of the woods.
According to Joubert, Gordhan's announcement of "tax relief" to the tune of R7-billion last year actually amounted to a veiled increase because "bracket creep" was allowed to gnaw away at consumers.
"For the 2013/14 tax year the tax threshold was increased by only 5.6%, while the thresholds of the other tax brackets were increased by 3.5%. As those increases were lower than the prevailing inflation rates, these adjustments, in fact, brought about a heavier tax burden and did not constitute relief," he said.
Only if one's income remained unchanged would the tax break have amounted to relief.
Sanisha Packirisamy, an economist at Momentum Asset Management, said yesterday that there was potential for some allowance for bracket creep at the middle to lower end of the consumer market.
Gordhan might increase income tax rates for higher-income earners or, possibly, even effect a rise in the value-added-tax rate, she said.
"However, we see this as being more of a risk next year, given that this is an election year."
The unexpected interest rate hike last month was also putting pressure on middle-class consumers, she said.
Joubert agreed and added that the middle class was being squeezed from all sides and could, in fact, be double-paying for many services.
"That is why we approached the Treasury to allow private security costs to be tax-deductible, but after initial discussions we have not heard anything from them," he said.
Most economists expect Reserve Bank governor Gill Marcus to push up repo rates again next month as inflation expectations are still uncomfortably high.
Happy 100th tax birthday
-National income tax was instituted in 1914, in what was then the Union of South Africa, according to Solidarity. Before the introduction of income tax state revenue came mainly from trade levies, user fees, indirect taxes and mine taxes.
-In 2012-2013 personal income tax contributed 34% of the state's tax revenue.
-In 1914, income tax was levied on income greater than £1000 a year based on a sliding scale starting at 6d per pound (or 2.5%). The first £1000 was not taxable.
-With the sliding scale adjustment, the effective income tax rate on £2000 was 1.35%. Someone with an income of £25000 a year had to pay only 7.2% in income tax.
Source: Solidarity