MUST READ: 'Stop plucking the goose that lays the golden taxes'

2017-03-01 05:00

Cape Town - Fin24 users have described the new tax rate for South Africa's super rich as a major disincentive, amid calls for meaningful job creation and an appeal not to relegate high earners to enemy ranks.

Finance Minister Pravin Gordhan in his Budget Speech announced government’s decision to institute a top tax bracket. This means individuals who earn R1.5m and more would be taxed at a rate of 45%, from a previous top rate of 41%.

There are about 100 000 people in the country who earn R1.5m and would be able to pay the tax.

READ: Budget 2017: The wealthy will pay more

Referring to the top tax bracket as a "new super tax", Fin24 user Harry Buttler cautioned that it is a major disincentive for taxpayers falling within this category.

"[It] will no doubt lead to increased tax evasion and perhaps emigration. For salaried employees earning in this bracket, it means you are a sitting duck with no means of lessening the effect."

The finance minister also announced an increase in withholding tax on dividends from 15% to 20%. Buttler said the increase on dividend tax, coupled with the hike in personal income is skewed.

"While I appreciate the big difference in income prevailing in South Africa, the taxpayers in this top bracket are being remunerated for value added and not due to structural or artificial reasons."

He encouraged efforts to create more jobs, which will help increase revenue collections.

READ: Judge Dennis Davis: SA's super rich likely not bitter over tax hike but …

Judge Dennis Davis, who is the chair of the Davis Tax Committee, said high income earners will likely have no qualms with the hike. However, he added that their gripe is probably with how the tax funds are used.

“I’m sure that most people don’t mind to pay the new 45% bracket, but at the same time, I’m certain that you also wish for the money allocated to do specific work, to actually do specific work and not enrich the elite few."

Lauren Draper, who is not impacted by the top tax, concurred with Judge Davis.

"Although we are not in a position where this (tax) will directly influence us, we have a few friends who are. The general consensus is that they are not unhappy about this but would like to know that their contribution is benefiting the country as a whole."

She called for greater transparency on government spending and swift and meaningful consequences for wasteful expenditure.

INFOGRAPHIC: All your tax tables

Draper also recommended that those carrying the highest tax burden be valued instead of being denigrated to the ranks of the enemy. "This point was made time and time again. They all, without exception, feel vilified, condemned and unsupported by government, labour, banks and the general population."

Pieter Van Pol's respond was short: "They've killed the donkey that carries the gold."

Sharing these sentiments, Harold Hopkinsly said raising the top tax raise makes it seem as if government wants to chase away the goose that lays the golden egg.

"I am happy to pay the taxes, but you can't keep on plucking the goose that lays the golden taxes. Surely the government would want to ensure that I stay here and therefore would want to protect this most valuable base."

Hopkinsly said high-income earners should be encouraged to earn more.

Check out Fin24's tax calculators:

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