Personal income tax accounts for 38.1 percent of total tax revenue according to the 2018 Tax Statistics, up from 37 percent in the previous year - of which 40 percent of taxpayers came from Gauteng.
Personal income tax rates in South Africa are already high by international standards at the current 45 percent maximum marginal income tax rate for taxable income above R1.5 million.
How much room does the government have, to further increase personal income tax rates? Findings from the 2018 PricewaterhouseCoopers Executive Directors: Practices and Remuneration Trends, 10th edition, found that the average total guaranteed package for chief executive in the top 10 listed JSE firms was an average of R24.9m, R15m for chief financial officers and R8.7m for executive directors.
The top executives had seen an 11 percent increase in average salaries - far outpacing the 6 percent inflation tracking increase for ordinary workers. These findings may potentially support calls for higher taxation on the top earners.
Sin tax (alcohol and cigarettes) are always a sore point, because the government can target consumption behaviours that are almost habitual for consumers. Since 2002, sin taxes have increased at a rate above inflation. The relative contributions of the alcohol categories were roughly beer 59 percent, spirits 27 percent and wine 14 percent.
No sin goes unpunished. With sin taxes having increased above inflation over the past years, we can expect a similar course of action from the 2019/2020 budget.
In the 2018 Budget year, VAT made up 24.57 percent of total tax revenue, making up the bulk of indirect taxes. After having been stable at 14 percent for a number of years last year saw an increase in the VAT rate by one percentage point to 15 percent, as delivered in the 2018 Budget Speech by then Finance Minister Malusi Gigaba.
VAT is an indirect tax on the consumption of goods and services in the economy. Certain businesses are required to register and to charge VAT on the taxable supplies of goods and services.
A key consideration for the incumbent Finance Minister, Tito Mboweni, will be the economic impact of any additional increases in VAT in an already challenging economic climate. A VAT increase directly impacts an already struggling consumer base.
The 2019 Budget Speech is a key priority on the South African calendar. “Given the current economic volatility, we anticipate the upcoming budget speech will outline key growth and improvement areas for South African consumers and businesses alike,” concludes the writer.
Aneesa Razack is the chief executive of FNB Share Investing, FNB Wealth and Investment.