Take the bitter with the sweet...

The following are some takeaways from the budget speech that will affect the average South African:

• Tax brackets will not be amended for the 2020 year of assessment. Sounds promising, unfortunately, it is not. What this means to the average South African is that more individuals may fall into a higher bracket if they receive salary increases. This is expected to raise an additional R12.8bn in revenue. South African’s will be paying for Mr Mboweni’s promises for additional revenue.

• There will be no change in the monthly medical tax credit for medical scheme contributions. The reason for this? To generate additional revenue of R1 billion in 2019/20.

• Government proposes a small increase in personal income tax rebates and the tax threshold allowing for a tiny amount of relief for inflation. The tax-free threshold has been upped from R78 150 to R79 000, a grand total of R850; But with no inflationary adjustments to the tax brackets and no inflationary increase in medical tax credits – this will not help or provide relief to the man on the street.

• The Fuel levy is to increase by 29c for petrol and 30c for diesel, this means that petrol will go up by 29c a litre and diesel will increase by 30c a litre in April 2019. The effect of this will also be seen in food prices increasing. The amounts are broken up respectively:
  • A carbon tax of 9c/litre on petrol and 10c/litre on diesel will become effective. Diesel refunds cannot be claimed against this tax.
  • The general fuel levy will be increased by 15c/litre for petrol and diesel. The increase is slightly below inflation.
  • The RAF levy is proposed to be increased by 5c.

• Motorists in Gauteng will have the further burden of E-tolls which are here to stay with the “user pay principle”.

• The sugar tax levy rate will increase by 10% to 2.21 cents per gram in excess of 4 grams of sugar per 100ml. Not only will South African’s have to tighten their budgets but they will have to curb their sweet tooth too.

• Sin taxes to increase by between 7.4% and 9% - just to highlight some of the increases in excise duties on alcohol and tobacco:

1. The excise duty on a can of beer goes up by 12 cents to R1.74
2. A 750ml bottle of wine will have an excise duty of R3.15, which is 22 cents more
3. The duty on a 750ml bottle of sparkling wine goes up by 84 cents to R10.16
4. The duty on a bottle of whiskey will go up by R4.54 to R65.84
5. A pack of 20 cigarettes goes up by R1.14 cents to R16.66
6. The excise duty on a typical cigar will go up by about 64 cents to R7.80

• If Vape and E-cigarette users thought they were safe, they are not, the government has identified the gap (with the use of electronic cigarettes and tobacco heating products) and now intends to tax it. The National Treasury and the Department of Health will consult on the appropriate mechanisms, structure and timing of the tax.
• The consolation prize? Despite the increases for beer and wine, there will be no change on sorghum beer and there will be zero rating of white bread flour, cake flour and sanitary pads from 1 April 2019. Unfortunately, once again, this does not provide that much relief to the man on the street. Further, In 2019, the grant values will barely increase as follows:
  • R80 increase for old age, disability, war veterans and care dependency grants.
  • R40 increase for the foster care grant to R1 000.
  • The child support grant will increase to R420 in April and to R430 in October.

• Eskom will not be bailed out - Mr Mboweni warned that the government would not be involved in paying Eskom’s debt of more than R400-billion, “The national government is not taking on Eskom’s debt. Eskom took on the debt. It must ultimately repay it”. The debt exists and Eskom has to pay it back there is no doubt about this. Where will Eskom find the money? The most likely answer is that it will find the surplus in the pockets of the average South African. Already Eskom has applied to NERSA to hike up electricity tariffs, without a bailout from the government it seems that they are left with very little other options. One could hope for the semi-privatisation of Eskom but this may be a dream that is not within reach for the near future.

Lastly, whilst SARS is being ‘fixed’ and collections are promised to be more stringent, “Improving collections hinges on restoring the efficiency of SARS. In the short term, such improvements may be more effective in raising revenue than further substantial tax increases". It is not calming and convincing when Mr Mboweni puts the financial burden and responsibility on the average South African, “It is all of our duty to tend the seed and see that it grows strong, tall and fruitful”. 

Monique de Abreu - Tax Consultant with Mazars