People earning R500 000 a year or more – 8.4 percent of all taxpayers – will account for 54 percent of personal income tax in the coming fiscal year, according to the Budget Review, released yesterday. And those earning between R150 000 and R250 000 – a quarter of individual taxpayers – will contribute 13.2 percent.
This reflects the impact of a progressive tax system – which provides for the tax rate to rise with more income.
While people with a taxable income of up to R165 000 a year will pay only 18 percent in income tax, income of more than R638 601 attracts a top marginal rate of 40 percent.
Therefore the average tax rate across the brackets rises faster than the increase in income. In line with established practice, individual taxpayers will get some relief in the coming fiscal year, as tax brackets and rebates are adjusted for inflation. In other words, individuals will not be penalised for receiving inflation-related pay increases.
But, at R7 billion, the value of the concessions is smaller than last year’s R9.5bn.
The threshold at which income becomes taxable has been lifted from R63 556 a year to R67 111; for people aged 65 to 74 from R99 056 to R104 611; and for those who are 75 or older from R110 889 to R117 111.
Primary, secondary and tertiary rebates have been raised respectively from R11 440 to R12 080; from R6 390 to R6 750; and from R2 130 to R2 250.
In addition, the Treasury has provided relief of about R350 million by raising monetary thresholds such as medical tax credits and employer-provided bursaries to relatives.
But indirect taxes will add to the overall burden. These include the general fuel levy and the Road Accident Fund levy, which will rise by 22.5c a litre and 8c a litre, respectively, from April 3.
Excise duties on tobacco products will rise by between 5.8 percent and 10 percent; and on alcoholic beverages between 5.7 percent and 10 percent.
The net effect of these tax proposals is expected to reduce total tax revenue by R2.4bn in the coming year.
Future revenue streams will be protected by anti-tax avoidance measures. One target will be local and offshore trusts – other than those established to address the needs of minor children and disabled people.
And debt financing by businesses will be scrutinised. “Although debt financing is a feature of all healthy economies, debt is often used to erode the tax base,” the review said.