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Cape Town - There won't be much to smile about as Finance Minister Pravin Gordhan battles to save the country from junk status in his 2016 Budget Speech, warned an industry expert.
Wouter Fourie, CFP® - FPI Financial Planner of the Year 2015 pulls no punches: "Saving us from becoming a junk credit status country must be one of the main aims of this budget. Finance Minister Pravin Gordhan will not be in a position to make people smile when he announces how taxes will be increased to save our country from disaster."
The purpose of a budget is to plan ahead so that there are sufficient funds to cover expenses. "Tax is the method to increase income and unfortunately as citizens of this country, we will all bear the price toward solving this problem created for us," warned Fourie.
READ: Taxpayers will feel brunt of Gordhan's whip
Here are some of his predictions for a budget which may be the most significant yet for South Africa's young democracy:
Income
1. Personal tax will rise by between 2% and 3% on all levels, taking the higher bracket from 41% to 43% and even as high as 44%.
2. VAT will increase from 14% to 15%.
3. The fuel levy: We should expect another increase.
4. Corporate tax: No increase expected here as taxing the corporates will have a direct influence on slowing down economic growth even further, something SA can’t afford at this stage.
5. Sin tax: An increase should always be expected.
6. Capital gains tax: A higher inclusion rate should be expected, rising from 33.3% up to 40% for individuals and companies and from 66.6% up to 70% for companies and trusts.
Expenditure
On expenditure, Fourie said government spend must be reduced and government employees' salaries must be managed in line with the budget, something which did not happen in 2015. "The higher increases created part of the problem we are facing now," said Fourie.
