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Port Elizabeth - The 2014/15 National Budget speech on February 26 will probably have very little good news for individual taxpayers. In a nutshell, there is very little room to reduce tax or give citizens a bit of a financial breather.
Luckily, it is unlikely that Finance Minister Pravin Gordhan will punish us with any new tax or cutting too deep into the allowable deductions.
Tax experts PricewaterhouseCoopers said that tax relief is expected to be limited, probably to the extent that it might not compensate fully for the so-called fiscal drag. Entrenched rebates, such as the primary rebate for taxpayers, will probably be adjusted upwards only slightly, while tax brackets will also only change slightly.
Most of the tax relief is expected to favour lower-income earners. No changes in the tax rates are expected.
It seems that the National Health Insurance Plan – which will put an extra burden on taxpayers – will probably be mentioned in the budget speech, but not much will be implemented.
PwC said that it was announced in the previous budget speech that a discussion paper on the possible funding mechanisms of the NHI would be issued during the last year.
“This discussion paper has yet to be issued. No major announcements are expected as to how it is proposed to fund the NHI ahead of the issue of the discussion paper.”
Value added tax
No changes are expected to the VAT rate. Although there is arguably scope to increase SA’s VAT rate given the relatively low rate and the growing trend to indirect taxes as a source of tax revenue globally, an increase in the VAT rate is unlikely at this stage, given the effect it has on the poor.
The minister might mention plans to change the VAT regime in due course, but only once the Davis Committee finishes its review of the SA tax system.
This committee is to report on the efficiency and equity of the VAT system and proposals on more than one VAT rate for different goods and changes in zero rating and exemptions later this year. Actual changes will only follow the Davis Committee report and changes to legislation.
Other environmental taxes
Other environmental taxes, such as the plastic bag levy and vehicle emissions tax, were significantly increased in 2013. No changes are therefore expected in these taxes in 2014.
The electricity levy is also not expected to be changed in 2014, given the proposed phasing out of this tax as the proposed carbon tax is phased in. It is possible that the introduction of new environmental taxes and levies could be announced in the budget.
Fuel levies and excise duties
It is expected that the general fuel levy will be increased by 20c to 25c per litre in line with recent increases. The RAF levy is also expected to increase in line with the increases over the last few years (expect 8 cents to 10 cents per litre).
Excise duties on tobacco and alcohol are a perennial soft target for increased taxes, said PwC. Smokers and drinkers can expect to see above inflation increases in these taxes, usually greeted with snickers and witty comments in the benches of parliament.
Gambling tax
In the 2012 budget speech it was announced that a national gambling tax would be introduced from April 1 2013 in the form of a 1% levy on gross gambling revenues. This would also apply to the National Lottery.
In the 2013 budget it was announced that legislation would be introduced in 2013. There have been no developments in this regard, and it is expected that the introduction of the tax will now take place sometime in 2014.
Carbon tax
An update is expected to be given on the proposed introduction of carbon tax. In the 2013 budget it was announced that a carbon tax would be introduced from January 1 2015, and a policy paper was issued for comment in May 2013. A further discussion paper on offsets was due to be issued in 2013, but has yet to be issued.
It is expected that announcements may be made in the 2014 budget with respect to significant refinements of the proposals, including better alignment with other carbon mitigation initiatives of government and design proposals for phase 2.
Given the delays being experienced with the process, the significant concerns raised regarding the proposals in the policy paper, the need for further consultation and the time required to draft legislation, the proposed implementation date of January 1 2015 is ambitious. Although government is currently insistent that this date will be achieved, it is likely that it will be delayed.
Savings incentives
In the 2012 budget it was announced that tax-preferred saving and investment vehicles were proposed to be introduced. A discussion paper was issued during 2012, and in the 2013 budget it was announced that government intends to proceed with this and that new accounts would be introduced by April 2015. It is expected that an update and further details will be provided in the 2014 budget.
In the 2013 budget it was announced that the taxation of trusts would be reformed. No legislative developments took place during 2013, and it is expected that the proposed reform will be postponed.
Luckily, it is unlikely that Finance Minister Pravin Gordhan will punish us with any new tax or cutting too deep into the allowable deductions.
Tax experts PricewaterhouseCoopers said that tax relief is expected to be limited, probably to the extent that it might not compensate fully for the so-called fiscal drag. Entrenched rebates, such as the primary rebate for taxpayers, will probably be adjusted upwards only slightly, while tax brackets will also only change slightly.
Most of the tax relief is expected to favour lower-income earners. No changes in the tax rates are expected.
It seems that the National Health Insurance Plan – which will put an extra burden on taxpayers – will probably be mentioned in the budget speech, but not much will be implemented.
PwC said that it was announced in the previous budget speech that a discussion paper on the possible funding mechanisms of the NHI would be issued during the last year.
“This discussion paper has yet to be issued. No major announcements are expected as to how it is proposed to fund the NHI ahead of the issue of the discussion paper.”
Value added tax
No changes are expected to the VAT rate. Although there is arguably scope to increase SA’s VAT rate given the relatively low rate and the growing trend to indirect taxes as a source of tax revenue globally, an increase in the VAT rate is unlikely at this stage, given the effect it has on the poor.
The minister might mention plans to change the VAT regime in due course, but only once the Davis Committee finishes its review of the SA tax system.
This committee is to report on the efficiency and equity of the VAT system and proposals on more than one VAT rate for different goods and changes in zero rating and exemptions later this year. Actual changes will only follow the Davis Committee report and changes to legislation.
Other environmental taxes
Other environmental taxes, such as the plastic bag levy and vehicle emissions tax, were significantly increased in 2013. No changes are therefore expected in these taxes in 2014.
The electricity levy is also not expected to be changed in 2014, given the proposed phasing out of this tax as the proposed carbon tax is phased in. It is possible that the introduction of new environmental taxes and levies could be announced in the budget.
Fuel levies and excise duties
It is expected that the general fuel levy will be increased by 20c to 25c per litre in line with recent increases. The RAF levy is also expected to increase in line with the increases over the last few years (expect 8 cents to 10 cents per litre).
Excise duties on tobacco and alcohol are a perennial soft target for increased taxes, said PwC. Smokers and drinkers can expect to see above inflation increases in these taxes, usually greeted with snickers and witty comments in the benches of parliament.
Gambling tax
In the 2012 budget speech it was announced that a national gambling tax would be introduced from April 1 2013 in the form of a 1% levy on gross gambling revenues. This would also apply to the National Lottery.
In the 2013 budget it was announced that legislation would be introduced in 2013. There have been no developments in this regard, and it is expected that the introduction of the tax will now take place sometime in 2014.
Carbon tax
An update is expected to be given on the proposed introduction of carbon tax. In the 2013 budget it was announced that a carbon tax would be introduced from January 1 2015, and a policy paper was issued for comment in May 2013. A further discussion paper on offsets was due to be issued in 2013, but has yet to be issued.
It is expected that announcements may be made in the 2014 budget with respect to significant refinements of the proposals, including better alignment with other carbon mitigation initiatives of government and design proposals for phase 2.
Given the delays being experienced with the process, the significant concerns raised regarding the proposals in the policy paper, the need for further consultation and the time required to draft legislation, the proposed implementation date of January 1 2015 is ambitious. Although government is currently insistent that this date will be achieved, it is likely that it will be delayed.
Savings incentives
In the 2012 budget it was announced that tax-preferred saving and investment vehicles were proposed to be introduced. A discussion paper was issued during 2012, and in the 2013 budget it was announced that government intends to proceed with this and that new accounts would be introduced by April 2015. It is expected that an update and further details will be provided in the 2014 budget.
In the 2013 budget it was announced that the taxation of trusts would be reformed. No legislative developments took place during 2013, and it is expected that the proposed reform will be postponed.
