The array of taxes in South Africa

In the Medium-Term Budget presentation in October 2017, finance minister Malusi Gigaba said that the deficit in the 2018/19 budget is expected to be R69.3 billion. Add to this increased tax of R15 billion that are reportedly required to fund “fee-free” higher education, and the targeted tax increases in the 2018/19 budget, and the deficit sits around the R80 billion mark - a staggering number.

It is likely that tax increases are in store which will be announced in the upcoming budget. A tactic of Treasury’s in recent years has been to introduce a raft of new taxes, which often passes by unnoticed by those footing the bill. It is interesting to sit back and reflect on the individual impact of the vast array of taxes and levies that are currently applicable, and those that will soon be applicable in South Africa.

• Individuals are subject to personal income tax (with a maximum marginal tax rate of 45 per cent) on taxable income;
• Companies are subject to corporate income tax of 28 per cent on taxable income;
• Most supplies made are subject to value-added tax at 14 per cent;
• Capital gains tax is levied on all capital gains made, at a maximum effective rate of 22.4 per cent;
• Dividends declared by a company are subject to dividends withholding tax of 20 per cent;
• A skills development levy of 1 per cent of the total amount paid in salaries to employees is paid by all employers to SARS;
• Employers pay unemployment insurance fund contributions of 2 per cent of the remuneration paid by the employer to the employee - 1 per cent contributed by the employee and 1 per cent contributed by the employer. The amount of the 1 per cent contribution due is capped at a maximum of R148.72 per month;
• The mineral and petroleum resources royalty is triggered on the transfer of a mineral resource extracted from within South Africa and it is levied at a rate between a minimum of 0.5 per cent and a maximum of 7 per cent on the value of the mineral resource transferred;
• A diamond export levy is payable on unpolished diamonds exported from South Africa at a rate of 5 per cent of the value;
• Estate duty of 20 per cent is payable on the value of an estate at the time of a person’s death;
• Donations tax of 20 per cent is payable on the value of donations made;
• Property transfer duty is a tax payable by buyers of all types of properties (with a maximum marginal tax rate of 13 per cent) on the value of the property;
• Securities transfer tax is levied on the transfer of any shares, at a rate of 0.25 per cent of the value;
• Customs and excise and in some instances ad valorem excise duties are levied. The person on the street may not be aware that excise duties alone on certain products account for a large portion of the retail price. For example, the targeted excise tax burden (including the so-called “sin” taxes) on wine, beer and spirits are 11 per cent, 23 per cent and 36 per cent of the weighted average retail price, respectively. On tobacco products, the targeted excise tax burden is currently 40 per cent;
• A fuel levy is included in the fuel price. Currently the general fuel levy is R3.15 and the Road Accident Fund levy is R1.63. Together these levies total R4.78, which roughly makes up 33 per cent of the total cost of a litre of fuel;
• Tolls are payable for driving on certain roads;
• Numerous environmental levies are paid –
  • plastic bags levy,
  • electricity generation levy,
  • electric filament lamp’s levy (i.e. a levy on non-energy-saving light bulbs),
  • motor vehicle CO2 emission levy, and
  • A second draft of the Carbon Tax Bill was released in December 2017, and Carbon tax will become a reality in the future;
• A new tax on sugary beverages has recently been brought into law, and will be paid by beverage manufacturers from 1 April 2018. This will raise the price of a can of cola, for example, by about 11 per cent;
• In the 2014 Budget, an acid mine drainage tax was announced, and the 2012 Budget proposed a gambling tax. Both of these proposed taxes were again mentioned in the 2017 Budget which one can view as an indication that the taxes will be implemented in future.

It is evident that the South African tax base is subject to a wide variety of taxes already, which when looked at as a whole, place the tax base under significant pressure. On the eve of this year’s budget speech, all stakeholders await the inevitable tax increases and possible new tax announcements with much trepidation.