Nicolette Dirk
THE income tax hike for individuals earning above R181 900 a year and the increase in the fuel levy announced in yesterday’s Budget have left many experts concerned about its impact it on consumers.
Many expected Finance Minister Nhlanhla Nene to raise taxes, but middle and upper income consumers will especially feel the pinch almost immediately, DebtBusters chief executive Ian Wason said.
“These are some of the most financially constrained South Africans.
Despite having houses, cars and ample monetary commitments, they have these possessions because they have borrowed money,” he said.
Cornelius Jansen van Rensburg, Wason’s counterpart at AfriBusiness, agreed, saying the subsequent increase in taxes would also have a negative impact on economic growth. “Privatisation, quality education and lowering taxes and administrative costs should have been minister Nene’s priorities because without it the economy cannot grow,” said Van Rensburg.
Kay Walsh, of Deloitte’s, said it was expected that the tax burden of wealthy individuals would be increased, but it was a surprise to see an increase in the marginal personal income tax rates for all individuals earning above R181 900.
“This increases the tax burden on both lower and higher middle-income households,” she said.
Even with the tax relief for small businesses - with the proposed tax regime for businesses with a turnover below R1 million a year - Business Partners Limited managing director Nazeem Martin said that by having to pay more taxes consumers would still have less disposable income to support these businesses
There were those who considered the minister’s maiden speech balanced considering the difficult position he was in, having to salvage an economy that had not shown expected growth.
“With no change to the VAT rate and considering the various spending programmes, the increased personal income tax is measured, given that it is the state’s main source of revenue,” said Albrecht Gantz, head of RisCura Analytics.
While the experts express their concerns, the R60 increase to social grants now means people like Marco Salies will get R1 410 a month. But having to support two daughters and a wife, the R60 extra offered little consolation, he said.
“Most of my grant is spent in the first week I get paid. Most days I have to borrow money from loan sharks. I don’t want to… but what can you do when your children say they are hungry? The extra R60 won’t go far. At least R1 500 would have helped more,” he said.
The property sector welcomed the transfer duty relief brought about by a higher threshold for the exemption of transfer duty – now at R750 000.
Seeff chairman Samuel Seeff said this would help make home ownership more affordable for the middle class, but they would have to find some extra money to compensate for the personal tax increase. “Sadly, too, the higher income tax is likely to lead to further cost hikes.”
Andrew Golding, chief executive at Pam Golding Properties, said the increase in transfer duties on property transactions above R2.3 million was regretted, as it placed a further burden on costs involved in selling and buying property.