You're going to pay more tax

Published Oct 26, 2016

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Pretoria - South Africans should brace themselves for a tax hike to be announced next February as government continues to grapple with a stagnant revenue base and a need to trim its debt.

In documents tabled on the occasion of the Medium-Term Budget Policy Statement in Parliament on Wednesday, National Treasury indicated that taxes will be hiked from next year.

There are no details as to whether this will come in the form of an increase in Value-Added Tax, which hasn't been raised since its introduction in 1993s, corporate tax, private tax, sin tax or in the fuel levy.

However, a table in the Medium-Term Budget Policy Statement, shows that the rate of tax South Africans pay will go up from an average of 29.9 percent currently to 30.4 percent by the 2019/20 financial year.

The hikes will be done in increments.

In the statement, Finance Minister Pravin Gordhan alludes to proposals that "include a combination of tax policy measures that will raise an additional R43 billion over the next two years, and a reduction in the expenditure ceiling of R26 billion".

The corporate tax rate, at 28 percent, was last changed in the 2009 financial year.

Bloomberg reported earlier this week that former Finance Minister Nhlanhla Nene, who was unceremoniously dismissed last December by President Jacob Zuma, hiked income taxes for the first time in two decades last year.

Revenue remains an concern

In February, Gordhan reduced the government's expenditure ceiling and limited compensation budgets at departments as government tightened its belt.

However, revenue remains a concern for the National Treasury, as there was a R4.5 billion shortfall in revenue collected in the first quarter of the financial year.

Gross tax revenue is projected to fall short of 2016 budget projections by R23 billion in the current year, R36 billion in 2017/18, and R52 billion in 2018/19.

"Given the state of the economy and the impact this has on tax revenues, he [Gordhan] would probably not be able to avoid making an adjustment to get the deficit larger," Christie Viljoen, an economist at KPMG in Cape Town told Bloomberg.

Announcements on tax hikes are generally made in the main budget in February, and National Treasury officials were not able on Wednesday to provide any further details.

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