Whilst our Finance Minister delivered a largely optimistic budget regarding tax rates and tax laws, the country’s financial stability going forward is reliant on a significant cut in public expenditure, particularly the government salary bill. The Minister realises that revenue collection is not expected to grow in line with inflation and therefore to ensure a lid is kept on government borrowings, expenditure needs to be cut!
After minimal adjustments over the last three years for fiscal drag (that is taking inflation into account in tax brackets), at last adjustments have been made and no new income tax rates have been introduced.
Many predicted an increase in VAT and possibly corporate tax rates but this did not transpire. A verbal commitment was in fact made to reduce the corporate tax rate of 28% which is higher than many developing countries.
Tax rates were increased in the usual areas (alcohol, smoking, fuel, plastic bag levies and carbon tax). However, no new taxes were introduced such as a wealth tax which many had predicted.
All in all a relatively taxpayer friendly budget under very difficult economic circumstances and let’s hope that government is able to convince the public service of the necessity to stop the continual salary growth in excess of inflation and government revenue.
Should you require a copy of our tax guide, which goes into the budget in detail please do not hesitate to contact us on 021 763 4400 or e-mail elana@aliwalroad.co.za.
