South African National Budget Speech 2018

Budget 2018: A measured budget, but SA tax base still under pressure

In line with the hopeful message delivered in the State of the Nation address by the President, the Minister of Finance delivered a measured budget which did not shy away from the difficult questions being asked of Treasury.

In line with the hopeful message delivered in the State of the Nation address by the President, the Minister of Finance today delivered a measured budget which did not shy away from the difficult questions being asked of Treasury.

There is no doubt that the tax adjustments announced will hit South Africans in their pockets. However, Treasury failed to panic in the face of a slow economy and a growing deficit, and implemented some difficult changes which will hopefully make a material difference to the budget. 

At the same time, statements regarding the realignment of tax incentives and the crack-down on illicit financial flows suggest that Treasury realises that increasing tax rates is not the only way to encourage economic activity and to bulk up the fiscus.

The Minister should be applauded for an honest medium term budget in October 2017, followed by an even better performance this year which can only strengthen the perception that Government is learning from its past mistakes and placing the country on a better course.

Main tax proposals

The main budget proposals for the 2018-19 fiscal year include  –

• an increase in VAT from 14% to 15%;
• no rate adjustments to the top four income tax brackets, and below inflation adjustments to the bottom three brackets;
• no rate adjustments to the top four income tax brackets, and below inflation adjustments to the bottom three brackets; 
• an increase of 52c/litre for fuel, consisting of a 22c/litre increase in the general fuel levy and 30c/litre increase in the Road Accident Fund levy; 
• higher ad valorem excise duties for luxury goods; 
• increased estate duty to be levied at 25% for estates above R30 million; 
• increases in the plastic bag levy, the motor vehicle emissions tax and the levy on incandescent light bulbs to promote eco-friendly choices; and 
• the sugar tax will be implemented from 1 April 2018.