• Inside Labour

    A smokescreen of misleading rhetoric won't make SA's problems go away, says Terry Bell.

  • Singapore shows the way

    SA badly needs leaders like the man who turned Singapore around, says Leopold Scholtz.

  • Israeli high-tech flies

    There is rising demand for the country’s high-tech products, says Arthur Goldstuck.

See More

Gordhan offers modest tax relief

Feb 22 2012 14:03 Mzwandile Jacks

Related Articles

Deficit at 4.6% in 'good health' budget

Public Works gets more for jobs

R845bn to be spent on infrastructure

Gauteng tolls get R5.8bn respite

Pretoria - Finance Minister Pravin Gordhan on Wednesday proposed personal income tax relief of R9.5bn, providing modest real tax relief.

“To ensure that the direct personal income tax burden on individuals remains reasonable, personal income tax brackets and rebates are adjusted to take account of inflation or 'bracket creep', as well as provide limited real tax relief,” Gordhan said.

He added that personal income tax provides the foundation for an equitable and progressive tax system.

Gordhan said the tax revenue was slightly lower than the government’s estimates in February last year.

The revised estimate for 2011/12 of R739bn was R10bn higher than projected in last year’s medium-term budget policy statement, he said.

According to Gordhan, as from March 1 2012 the tax credit for contributions to medical schemes will be introduced at a rate of R230 a month for the first two beneficiaries and R154 each for additional beneficiaries.

“Taxpayers 65 years and older and people with disabilities will be included in the second phase of this reform, which will be implemented in 2014,” Gordhan said.

“These reforms will significantly improve the fairness of the personal income tax system.”

He said the reform of the tax treatment of contributions to retirement funds is also envisaged to take effect in 2014.

“To encourage voluntary savings, consideration is being given to the introduction of tax-exempt short and medium-term savings products,” he said.

“The proposal is that individuals should be permitted to save up to R30 000 a year, with a lifetime limit of R500 000, in registered savings or investment products that would be free of tax on interest, dividends or capital gains.”

Current tax-free interest income thresholds will be reviewed and possibly phased out as part of this reform.

The secondary tax on companies will be terminated on March 31 2012 and a withholding tax on dividends will be implemented on April 1 2012.

“This will align SA’s tax treatment of dividends with that in most other countries. Pension funds will benefit from this transition as they will receive dividends tax free. The dividend tax will be introduced at 15%,” Gordhan said.

He said the introduction of capital gains tax in October 2001 was an important step in broadening the tax base.

“In order to reduce the scope for tax arbitrage and broaden the tax base further, the CGT inclusion rate for individuals and special trusts will be increased with effect from March 1 2012 from 25% to 33.3% and for companies and other trusts from 50% to 66.6%,” he said.
pravin gordhan  |  budget 2012



Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Add your comment
Comment 0 characters remaining

Company Snapshot

We're talking about:


Johannesburg has been selected to host the Global Entrepreneurship Congress in 2017. "[The congress] will ensure that small business development remains firmly on the national agenda and the radar screen of all stakeholders, the Small Business Development minister said.

SABudget on Twitter

Twitter icon

Join the Fin24.com conversation by using SABudget every time you tweet.


Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

People who fall victim to Ponzi scams are:

Previous results · Suggest a vote