#Budget2017: Disappointment over new 'aggressive' top tax
The creation of a new top tax rate of 45% for individuals earning over R1.5m has sparked concern.
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22 Feb 18:29
Coega welcomes Budget speech
“The Coega Development
Corporation (CDC) welcomes the Honourable Minister of Finance Pravin Gordhan,
Budget speech delivered this afternoon,” said Dr Ayanda Vilakazi, CDC Head of
Marketing and Communications.
In support of the government’s
approach towards industrialisation, economic transformation, and inclusive
growth, the CDC has continued to ensure that it demonstrates its commitment
towards its vision to be the leading catalyst for championing of the
socio-economic growth in the Eastern Cape and South Africa at large.
22 Feb 18:27
Disappointment over new "aggressive" top tax
A director at Werksmans Attorneys expressed disappointment at the creation of what it called "an aggressive" new top tax rate of 45% for individuals earning over R1.5m.
"We were expecting higher taxes on the wealthy, but this is a larger increase than we thought reasonable. We hope this is not the start of a trend of very high taxes on wealthier individuals, many of whom are mobile and can choose to live anywhere in the world," said Doelie Lessing.
She said Werksmans is also disappointed at the rise in dividend tax which he said is effectively a penalty on the fruits of investing.
"We need to encourage saving and investment, not penalise it. The rise in the annual Tax Free Saving Allowance to R33 000 is welcome but it should have been raised even higher to offset higher dividend taxes and further encourage saving."
22 Feb 18:23
How the Budget impacts the real estate industry
Gerhard Kotze, MD of the RealNet estate agency group, says the Budget delivered today is extremely positive and encouraging for the real estate industry, apart from the hefty increases in the fuel and road accident fund levies, which will increase household transport costs.
“From our point of view, there will be an immediate benefit from the increase in the Transfer Duty threshold to R900 000. This will be a huge relief not only to first-time buyers but also to many existing owners who are downscaling now from large homes to smaller ones in order to reduce their expenditure on maintenance, rates and utilities such as water and electricity.
"The new threshold will enable many of these buyers to use all the equity built up in their existing homes as a deposit on their new home instead of having to divert some of it to transfer duty. This in turn will mean that they are able to reduce their monthly bond instalments and use the difference to pay off debt or save more."
Meanwhile, he said the change will lower the amount of cash that first-time buyers need to cover a deposit plus transaction costs, and that will definitely make it easier for them to acquire their own homes sooner rather than later.
"On a home priced at R900 000, the cash amount required for transaction costs will now decrease from almost R40 000 to approximately R25 000 – and being able to put the difference towards the deposit will definitely bring forward the purchase date.”
Other positive aspects of the Budget for real estate, he said, include the fact that there was neither a VAT increase nor an across-the-board increase in personal taxes and that there was no increase in the Capital Gains Tax rate which would have acted as a deterrent to property investors.
“We also appreciate the renewed focus on the redevelopment and improvement of urban infrastructures including roads, water reticulation networks and public transport. If these plans can be implemented as envisaged, it will raise living standards in our cities and towns and have major spinoffs not only in terms of property demand but in terms of tourism, enterprise development and job creation."
22 Feb 18:17
Do you know what bracket creep is?
The new top marginal
income tax bracket combined with partial relief for so-called “bracket creep”
is expected to contribute R16.5 billion of the total amount of R28 billion that
the tax proposals are projected to raise.
Kelly Pretorius, senior
associate for tax at Bowmans, explained what "bracket creep" is:
“Bracket creep” (also
referred to as “fiscal drag”) occurs when personal income tax tables are not
fully adjusted for inflation, so that inflationary salary adjustments push
taxpayers into a higher tax bracket, reducing their after-tax income."
According to the commentary to the 2017 Budget Review, an estimated R14.6
billion in additional revenue could have been brought in if no adjustments were
made to the personal income tax tables in 2017/18.
The “bracket creep”
adjustment for 2017/18 provides for R2.5 billion in relief (bringing in R12.2
billion as additional revenue).
22 Feb 18:13
The Budget at a glance...
22 Feb 18:11
Budget 2017 - Still at the crossroads
There were no surprises in Budget 2017 relative to pre-Budget expectations, which maps out a credible path to the stabilisation of the government debt ratio over the medium term. This is the message from Arthur Kamp of Sanlam Investments.
"Importantly, government revenue is projected to exceed non-interest spending on the Main Budget by 2018/19. The consolidated budget deficit narrows from -3.4% of GDP in 2016/17 to -2.6% of GDP in 2019/20, while gross loan debt, which investors must fund, is expected to peak at 52.9% of GDP in 2018/19.
"Meanwhile, the net debt ratio (gross loan debt adjusted for government’s cash balances) is expected to increase to 48.1% of GDP by 2019/20 from 45.5% of GDP at the end of the current tax year."
Kamp said the importance of stabilising the debt position is illustrated by the continued sharp increase in Main Budget debt service costs on the debt from R146.3 billion in 2016/17 to R162.4 billion in 2017/18.
"This is absorbing scarce resources, which could be used for development expenditure."
22 Feb 18:08
Harsh times ahead - Lew Geffen
Anyone still viewing the country’s medium term economic outlook through rose-tinted spectacles had them rudely ripped off by the Finance Minister on Wednesday, said Lew Geffen, chairperson of South African property industry titan Lew Geffen Sotheby’s International Realty.
“There are unquestionably harsh times ahead," he warned. “We’re immensely grateful there was no increase in VAT, but the new super tax bracket of 45% for individuals who earn more than R1.5 million isn’t good news for the upper end of the residential property sector."
Although Geffen welcomed the raising of the property transfer fee threshold to R900 000 from R750 000, he said in reality it will only provide relief for low to lower-middle income households.
He also noted that Gordhan uttered the word ‘transformation’ more than 50 times in his 29-page speech. "He is not wrong that transformation is needed in South Africa, but not at the expense of the tax-payers on whose backs the economy is built."
Geffen said businesses big and small were largely ignored in the Budget. "That’s bad business for the economy, for consumers and for home-owners.”
22 Feb 17:58
Dr Langelihle Simela, Business Development Manager in the Absa AgriBusiness Centre of Excellence:
“Emphasis on public-private partnerships in the effective delivery of government economic programs, including in the agricultural sector, is welcome. However, we need to start making these partnerships a reality.“Allocation of R30 billion (in 2019/2020) to agriculture and land reform welcome, but this needs to be prudently spent to have desired outcomes.”
22 Feb 17:56
Tim Mertens, chairperson
of Sovereign Trust:
"With the increase in personal taxation and the already punitive
taxes being introduced to attempt to reduce effective estate planning
opportunities for South African taxpayers across the board , now more than ever
it is advisable to obtain sound advice so that proactive planning can be
22 Feb 17:53
No surprise over taxing the rich more
I am not surprised by the rise in the top
marginal income tax rate to 45%, given the R28 billion revenue gap
Gordhan needed to plug, said tax
expert and director of legislation at Sage, Rob Cooper.
"As a form of wealth tax, it’s more politically
acceptable than a VAT increase; like the National Minimum Wage, it also has a
redistributive effect that could help reduce inequality.
That said, given that high-income earners in
South Africa already carry a heavy tax burden, government should perhaps be
cautious about adding too much more to it in the next Budget Speech, Cooper said.
There is a
balance to be struck between collecting a fair share from the wealthy and
taxing them so heavily that tax avoidance or moving overseas become attractive
options to them, he explained.
Cooper said the increase in withholding tax on dividends
from 15% to 20% is significant since it will raise a further R6.8 billion for
"While it’s a relatively equitable tax increase in an environment
with little room for manoeuvre, it could affect pensioners who depend on income
from dividends as well as discourage savers. Also noteworthy is a change to the
law that includes three categories of dividends in remuneration from 1 March
2017. This means that these dividends can be potentially taxed at 45% -
it was 41% before. “
22 Feb 17:48
How will rating agencies respond to the Budget?
Rating agencies will be happy that the fiscal deficit is still on a narrowing path, though maybe not as quickly as they would like to see, according to KPMG.
A consolidated fiscal surplus (revenue minus non-interest expenditure) will be in place by next year.
"This will enable a peak in public debt (as percentage of GDP) in the near future. However, progress elsewhere – e.g. reforms to reduce structural constraints on the South African economy – are still not happening quickly enough."
The next official reviews of South Africa’s sovereign ratings are scheduled for early in June. It is expected that S&P Global Ratings and Fitch Ratings will not return their current “negative” outlooks to stable.
"Indeed, given the weak state of the local economy as well as the strained political environment, it is expected that a downgrade will still happen this year."
22 Feb 17:45
Social good requires
economic growth- Chamber of Mines
Finance Minister Pravin Gordhan has done an effective job of maintaining fiscal discipline with a budget deficit of 3.1% in these most trying of times, says the Chamber of Mines of South Africa.
"The 2017/18 Budget demonstrates the truism that sustaining and enhancing social good is dependent on the extent of economic growth that is enjoyed."
In particular, the Chamber said Gorhan added flesh to the discourse on transformation in South Africa.
"Most importantly, he highlighted the mutual interdependence between the drive for competitive growth and greater social equity. That is something of which the mining industry is highly conscious in our own efforts to contribute to transformation in South Africa."
22 Feb 17:32
Budget falls short of addressing radical economic transformation - BCC
The 2017 Budget is not enough to address
radical economic transformation in South Africa, says the office of the Black Business Council.
The BBC calls
upon Government to use wider range of Macro-economic policy tools than Keynes
and this must include exchange rates, state control and influence over finance
capital, reserve requirements, capital controls, prescribed assets, credit
quotas, differential interest rates.” There must be a close co-ordination
of monetary, fiscal and industrial policies.
The BBC shall continue through its portfolio
committees to fight for radical economic transformation war on the legislative
front. We shall maintain active scrutiny to each policy initiative and
framing of legislation and each bill put to Parliament to ensure that there are
no constraints placed radical economic transformation.
In this quest, we
shall involve those of our entrepreneurs who are directly affected by new and
amended bills introduced in parliament. An example is how we engaged the
insurance bill where the Black insurance industry identified creeping
transformative clauses which seeks to undermine the advancement of Black
22 Feb 17:26
Reaction to the budget speech is starting to pour in...
22 Feb 17:23
Have a look at Finance Minister Pravin Gordhan's budget speech in one infographic.
22 Feb 16:20
No time to wade through all the jargon in the budget speech? Watch this video of the budget in 90 seconds.
22 Feb 15:45
Are you worries about the hike in sin taxes?
22 Feb 15:35
FULL SPEECH: Pravin Gordhan's #Budget2017 speech
22 Feb 15:34
2017 #Rand: The currency has hold its own throughout the Budget Speech and
currently trades at R13.09. Been trading between R13.06 and R13.12 for most of
the day. The budget is mixed and will need to see if the caps on government
spending will be adhered to. - TreasuryOne
22 Feb 15:33
Gordhan: There is a challenge for us to set a new example
for all. Let us not side-step this task. Ours is the collective responsibility, despite many
distractions, to live up to the expectations of Oliver Tambo, Walter Sisulu, Beyers
Naude, Nelson Mandela, Albert Luthuli, Yusuf Dadoo, Lilian Ngoyi and many
In this way we will honour the confidence and trust of our
people. In this way our transformation efforts will serve all South Africans.
22 Feb 15:33
Gordhan: We also need to consider, in the face of such
intractable economic hardships and disparities, whether we should supplement
our Constitutional Bill of Rights with a “Charter of Economic Rights” – a
charter that would bind all of us to an economy which:
- Provides access to decent and well remunerated jobs,
- Facilitates training and retraining of citizens in the
face of technological change, and
- Creates a supportive environment for micro, small and
medium businesses and co- operatives.
22 Feb 15:32
merger still on the cards as consultants finalise review
The merger of South African
Airways (SAA) with South African Express, and the introduction of a strategic
equity partner, are still being considered, National Treasury said in its 2017
assisting government with a review of the state’s aviation assets,"
Treasury said in its 2017 Budget.
"The review is
expected to be complete by the end of March 2017."
22 Feb 15:31
Gordhan: I paraphrase what I said in October last year:
Fellow South Africans, if we make the right choices and do
the right things we will achieve a just and fair society, founded on human
dignity and equality. We will indeed transform our economy and country so that
we all live in dignity, peace and wellbeing.
This is the time for activists, workers, businesspersons,
the clergy, professionals and citizens at large to actively engage in shaping
the transformation agenda and ensuring that we do have a just and equitable
22 Feb 15:30
Minister Pravin Gordhan used the word “transformation” more than 50 times in
his Budget Speech, but against this background said: “Our growth challenge is
intertwined with our transformation imperative. We need to transform in order
to grow, we need to grow in order to transform. Without transformation, growth
will reinforce inequality; without growth, transformation will be distorted by
22 Feb 15:29
Gordhan: Negativity inspired by greed and selfishness will
obstruct us. Defeat the bearers of this toxic ethic.
South Africans, wherever you are…. Own this process; defend
your gains; demand accountability.
Be an active agent for change. Umanyano Ngamandla (Unity is
22 Feb 15:29
R5bn for universities and colleges in Pravin's budget
changes in higher education, such as a decision to have a zero-fee increase in
2015, has had a ripple effect on a number of government departments, causing
unanticipated budget cuts to critical programmes.
In his 2017 Budget Overview, Finance Minister Pravin Gordhan said an additional
R5bn is earmarked for higher education over the next three years. That is over
and above the R32bn in extra funds that had been allocated previously.
Gordhan said post-school education is the second fastest-growing spending
category in the 2017/18 budget.
Spending on higher education is expected to
reach R89.8bn by 2019/20, growing at an average annual rate of 9.2% over the
Of this amount, 42.7% is for university subsidies, 21.9% for the National
Student Financial Aid Scheme (NSFAS), and 9.7% for technical and vocational
education and training.
22 Feb 15:26
Gordhan: The main elements of this budget (let me wake you
up, he adds):
- While global growth is slightly better, geo-political and
economic uncertainties have increased.
- Our low growth trajectory provides a major challenge for
government and citizens.
- We need to radically transform our economy so that we have
a more diversified economy, with more jobs and inclusivity in ownership and
- Our financial situation is difficult, but we have still
produced a credible budget.
- We need to prioritise our spending better, implement our
plans more effectively and make a greater impact.
- We need to build the widest possible partnership to
promote consensus and action on a programme for inclusive growth and
22 Feb 15:25
Treasury has watered down its proposed tax on
sugary drinks – now at around 11% rather than the proposed – 20%, but included
pure fruit juice in the tax.
22 Feb 15:25
Gordhan: We have proved that we can change course through
negotiation, participation and partnership. We have the resilience needed to
more forward confidently even in uncertain times.
In the year ahead our focus must be on inclusive growth and a transformation action plan. Bold and ethical leadership is needed from all sectors of society.
22 Feb 15:25
Gordhan: Our past efforts have come short of delivering
either adequate growth or the social transformation we need. We are at a
crossroads now. We need to act urgently to build confidence and support
investment. We need to bring all stakeholders onto an inclusive growth and
22 Feb 15:25
Gordhan: We have taken a giant step forward. We have agreed
to implement a minimum wage of R20 an hour with effect from next year. Its
implementation will require complementary measures to support workers and
employers in vulnerable and low-wage sectors, and enhanced assistance to young
and unskilled work-seekers. We also need to seek progress on social security
reform alongside phasing in the minimum wage.
22 Feb 15:25
Gordhan: Transformation without economic growth would be
narrow and unsustainable. Growth without transformation would only reinforce
the inequitable patterns of wealth inherited from the past.
22 Feb 15:24
Gordhan: Three new banks have been granted provisional
licences, including the PostBank, and two new stock exchanges. Their business
models are based on technological innovation with potential to bring services
more cost-effectively to more people.
22 Feb 15:24
Gordhan: Although progress has been made in transforming the
financial sector, more needs to be done to broaden access through more
affordable financial services, improve market conduct, ensure employment equity
at top management levels, provide procurement opportunities and transform
22 Feb 15:22
Gordhan: There is evidence of a collusive - and greedy -
culture at trading desks in banks. It is precisely to deal with such abuses
that we have proposed a dedicated market conduct regulator, and we hope
Parliament will pass this Bill as soon as possible.
Collusion must be stamped out whether it is in banking,
construction or the bread industry. But banks need tougher rules to cover
financial market abuses, and the Reserve Bank and National Treasury have
initiated work on a more comprehensive Financial Markets Review under the
leadership of former Deputy Governor James Cross, to build on the Review
conducted in 2014.
22 Feb 15:21
Gordhan: As an employer, National Government has
investigated 135,000 emolument orders against state employees and reduced the
number of deductions by 49,000. We hope all employers will assist their
employees in the same way.
22 Feb 15:21
Fin24 received close to 200 Tips for Pravin:
Here are a few:
tighter controls to curb corruption and misuse of public funds as our budget
shortfall is mainly caused by misuse of public funds.
Minister Gordhan The budget must be fair and equitable for the South African
economy .It is clear that the budget shortfall is due to corrupt activity by
senior government officials .
remember, tax increases are poison for the economy. We should be striving to
reduce taxes a la Trump. Currently a VAT increase with exemptions is probably
22 Feb 15:20
Gordhan: Where fraud or corruption is identified, action
must be taken. (Applause from the audience)
22 Feb 15:20
Gordhan: The central supplier database is now fully
operational. It has made doing business with the state much easier and cost
effective. It enables government to know who it is doing business with and to
use technology to reduce opportunities for fraud and corruption. Already, large
numbers of transactions have been identified for further investigation:
- Public service employees who appear to be doing business
with the state,
- Supply agreements that reflect the identity numbers of
- Payments to bank accounts other than those of the relevant
22 Feb 15:19
Gordhan: There will be further procurement reforms this
year. A draft Public Procurement Bill will be published shortly.
22 Feb 15:19
berates ‘reckless’ banks, other corporates
Minister Pravin Gordhan called for tougher rules to cover financial market
abuses, citing the recent claims of bank collusion as a case in point of such
Speaking at a media conference ahead of his 2017 Budget Speech, Gordhan said
there’s a “reckless culture” in certain parts of the financial sector.
“Treasury said previously that it’s a good thing that the Competition
Commission is investigation this matter and that rogue traders have been
Gordhan said it is exactly this “reckless culture” that permeated Wall Street
and resulted in the economic meltdown of 2008 and the ensuing great
“Those responsible must be dealt with,” Gordhan said, “but there are also legal
processes that must be obeyed. A Constitutional democracy means everybody has
rights and all sides of the argument need to be heard.”
Gordhan said collusion must be stamped out whether it is in banking,
construction, or the bread industry.