Well the wait is finally over. Minister Tito Mboweni finally put South Africans in the light regarding the countries financial health or rather ill health.
After many sleepless nights, South Africans can now gauge the year ahead and just how taxed they will be before the next budget speech in February 2021.
Counter to expectations, the government will adjust tax brackets above inflation, which will see taxpayers paying 5.2% less income tax. However, there will be increases to the fuel levies, and the introduction of a new tax on heated tobacco products.
- Income tax: There will be an above-inflation increase in the personal income tax brackets and rebates.
- Fuel levies: Increases of 25 cents per litre to the fuel levy, which consists of a 16 cents per litre increase in the general fuel levy and a 9 cents per litre increase in the RAF levy.
- Tax-free savings: Increase the annual contribution limit to tax-free savings accounts by R3,000 from 1 March 2020.
- Sin tax: Increase excise duties on alcohol and tobacco by between 4.4 and 7.5%. Also, the government will introduce new excise duty on heated tobacco products, to be taxed at a rate of 75 per cent of the cigarette excise rate with immediate effect.
- Expat tax: Government will increase the cap on the exemption of foreign remuneration earned by South African tax residents to R1.25 million per year from 1 March 2020.
- Green tax: The carbon tax rate will increase by 5.6% for the 2020 calendar year. Accordingly, the carbon tax rate will increase from R120 per tonne of carbon dioxide equivalent to R127 per tonne of carbon dioxide equivalent. The plastic bag levy will go up 25 cents.
- Medical aid tax credits: After a freeze last year, tax credits will increase R310 to R319 per month for the first two beneficiaries, and from R209 to R215 per month for remaining beneficiaries.
Good news for businesses in South Africa is that Treasury is looking at a future cut in corporate tax.
“We are also proposing broadening the corporate income tax base. This additional revenue will be used to reduce the corporate tax rate in the near future to help our businesses grow,” he said.
In closing, the minister of finance said: “Winning is not easy. Less than two years before winning the World Cup, the Springboks lost 57-nil to the All Blacks. Miss Universe did not win her first attempt at Miss South Africa. Winning takes patience, prudence and perseverance.
Table: Courtesy Moneyweb