DURBAN - The 2018 budget was not as strict on the wealthier taxpayers, according to Standard Bank Wealth and Investment.
According to the bank, while a super tax on wealthy citizens was not announced, the excise duties and donations tax were directed specifically at the wealth South African taxpayers.
The Global Head of Wealth Advisory for Standard Bank Wealth and Investments, Philip Faure, said that all the predictions before the budget speech were much worse that was said by the Finance Minister Malusi Gigaba in his speech.
Faure said that the impact on wealthy South Africans is "not as severe as it could have been".
Faure said "On the positive side, there was no introduction of a direct wealth tax, the top marginal tax rate did not go up and there was no adjustment in CGT inclusion rates. However, adjustment to donations tax, estate duty, VAT, a levy on international travel, and higher excise duty on luxury goods will lead to increased tax payable".
The global head said that whatever the negative effects are, they are based on the current taxes and that we are going through a hard economic cycle and there is no need to worry despite the wealthy now having to pay a higher burden of overall taxes.
"We have to believe the new government is going to focus on economic growth and things should settle down in the next few years," said Faure.
The government is also proposing to align the tax treatment of preservation funds upon emigration. On formal emigration, a taxpayer is able to withdraw the whole value from their retirement annuity, however, the government has said in the budget it was looking at aligning the tax treatment of different retirement withdrawals in such situations.
Small adjustments to income tax brackets, and therefore below inflation adjustments was a noteworthy feature of the budget. Limited changes to the personal income tax brackets continue the progressive steepening of the income tax curve, which in recent years has involved rising capital gains and shareholder dividend taxes creating a new rate of 45%for the top tax bracket.
However, the important features of this budget are:
1. Top marginal remains 45% for taxable income that is more than R1500001; limited relief in personal income tax brackets to accommodate inflation.
2. VAT increases from 14% to 15%.
3. No adjustments to CGT inclusion rates.
4. Donations tax rises from 20% to 25% tax on amounts above R30 million.
5. Estate duty lifts from 20% to 25% for estates above R30 million.
6. Increase in excise duty rate on luxury goods from 7% to 9%.
7. Levy on international travel R190 per passenger departing international flights.
8. The rise of 52 cents a litre for fuel, made up of a 22 cent a litre increase in the general fuel levy and 30 cents a litre in the Road Accident Fund.
Offshore allowances which have been capped at R10 million yearly investment allowance and R1 million discretionary allowance were not increased.
The treatment of taxation as it relates to trusts is untouched since the introduction of section 7C in 2017, which negatively impacted interest-free loans from individuals to trusts.
If used properly, trusts remain a valuable vehicle for the protection of assets and legacy planning.
Higher tax rates for the wealthy had been alluded to as one of the ways to create more tax income without lifting the VAT rate.
But, VAT was increased by 1% as it is estimated to have the least adverse impact on the economic growth and employment over the medium term with the biggest spenders carry the biggest proportion of this indirect tax.
Faure concluded saying "We saw a number of increases in taxes that are traditionally paid by wealthier taxpayers and this was not too surprising. A carefully planned and managed overall wealth strategy remains the best way to overcome these immediate tax increases, but I also expect economic growth to assist in reducing the tax burden in the future".
- BUSINESS REPORT ONLINE