DURBAN - The budget speech often comes with much anticipation of a strategic plan for government spending and revenue collection for the year ahead.
The government’s revenue collection strategy affects both businesses and consumers, albeit in different ways. Aneesa Razack, Chief Executive of FNB Share Investing, FNB Wealth and Investments details some of the key considerations ahead of this year’s budget speech.
Personal income tax
Personal income tax accounts for approximately 38.1% of total tax revenue according to the 2018 Tax Statistics, up from 37% in the previous year - of which 40% of taxpayers came from Gauteng. Personal income tax rates in South Africa are already high by international standards at the current 45% maximum marginal income tax rate for taxable income above R1.5 million.
The question to be asked is how much room does government have, to further increase personal income tax rates? Findings from the 2018 PwC Executive directors: Practices and Remuneration Trends, 10th Edition, found that the average total guaranteed package for CEOs in the top 10 listed JSE firms was an average of R24.9 million, R15.1 million for CFOs and R8.7 million for executive directors. The top executives had seen an 11% increase in average salaries – far outpacing the 6% inflation tracking increase for ordinary workers. These findings may potentially support calls for higher taxation on the top earners, meaning there is some upside risk on the 45% marginal tax rate.