The 2017 budget speech is an object lesson in balancing competing priorities: the need for increased revenue collection set against a number of sensitive political considerations, made more acute by the looming national election in 2019 and the watching brief by the rating agencies.
There has been a significant under-collection of tax in the 2017 financial year, and the resultant tax rate adjustments are to personal income tax (up a staggering 4% at the top end of the spectrum) and dividends tax (increased from 15% to 20%).
While a number of commentators are sceptical as to whether or not these increases will “fill the hole”, they certainly are more palatable to the electorate at large than an increase in Value-Added Tax.
On the positive side, no ambitious spending projects were hastily adopted which should help alleviate the deficit. The Minister stuck to his guns and continued on the course which has marked his tenure in office: presenting conservative but sensible budgets, many of which have been crafted amidst one or other calamity or controversy.
Main tax proposals
The main budget proposals for the 2017-18 fiscal year include are following –
- new top personal income tax of 45% for individuals with taxable incomes above R1.5 million;
- an increase in the marginal rate for trusts to 45% (from the current 41%);
- an increase in dividends withholding tax from 15% to 20%;
- the introduction of both the carbon tax and sugar tax in the near future; and
- the transfer duty-free threshold on purchases of residential property will increase from R750 000 to R900 000 on 1 March 2017.