Absa highlights the top 10 things to know about the Budget Speech
1. VAT increased from 14% to 15%
will raise the lion’s share of the R36 billion in additional taxes in 2018/19
through a one percentage point hike in the VAT rate. This is expected to
contribute roughly R23 billion to the fiscus.
To limit the
impact on poor households, the current zero-rating on basic foodstuffs such as
maize meal, brown bread and rice will remain in place.
households will also be compensated through an above average increase in social
grants, while some relief will be provided for lower-income individuals through
an increase in the bottom three personal income tax brackets and the rebates,
finance minister Malusi Gigaba said during his budget speech on Wednesday.
will take effect on April 1 2018.
2. No inflation adjustment for four wealthiest
income tax brackets
will raise almost R7 billion through lower-than-inflation increases to personal
income tax brackets and rebates.
earners will bear the brunt of these increases – while the bottom three
personal income tax brackets as well as the primary, secondary and tertiary
rebates will be partially adjusted for inflation through a 3.1% increase, the
top four brackets will remain unchanged.
3. No wealth tax, but…
has been much speculation about the introduction of a wealth tax – potentially
a land tax or annual net wealth tax – no explicit announcement was made in this
Gigaba announced an increase in the ad-valorem excise duty rate on luxury goods
from 7% to 9%, effective April 1 2018.
the budget review, these duties apply to “goods that are consumed mainly by
wealthier households (such as cosmetics, electronics and golf balls)”.
will also increase from 20% to 25% for estates of R30 million or more. This
will take effect on March 1 2018.
4. No change to capital gains or dividend taxes
tax rate remains unchanged at 20% while the maximum effective capital gains tax
rate for individuals stays at 18%.
5. Higher fuel levies
fuel levy will increase by 22 cents per litre while the Road Accident Fund levy
will rise by 30 cents per litre. This will take effect on April 4.
6. Medical tax credit remains in place, but…
credits have not been abolished, but will only increase from R303 to R310 per
month for the first two beneficiaries (2.3%), and from R204 to R209 per month
(2.5%) for the remaining beneficiaries.
“Over the next
three years, below-inflation increases in medical tax credits will help
government to fund the rollout of national health insurance,” the budget review
also indicated that it was concerned that certain taxpayers might be
“excessively benefiting from this rebate, specifically in instances where
multiple taxpayers contribute toward the medical scheme or expenses of another
person (for example, adult children jointly contributing to their elderly
mother’s medical scheme). Where taxpayers carry a share of the medical scheme,
contribution or medical cost, it is proposed that the medical tax credit should
also be apportioned between the various contributors”.
7. Smokers and drinkers pay more
on tobacco products will increase by 8.5%, and those on alcohol between 6% and
8. Economic growth outlook improves, but
Treasury revised its GDP growth projection for 2017 from 0.7% to 1%. It
anticipates growth of 1.5% in 2018, compared to 1.1% in the Medium-Term Budget
“While this is
a good start, there are immediate policy interventions that we need to make to
ensure that we create the right environment for investment, growth and
employment,” Gigaba said.
9. Turnaround plan for state-owned companies
plans to introduce a reform programme for SOCs, which will consider their role
in economic development. Entities like Eskom and SAA have been a huge burden on
government coffers amid allegations of mismanagement and corruption.
will require restructuring with equity investment. In the coming year,
government may be required to provide financial support to several SOCs which
could be done through a combination of disposing of non-core assets, strategic
equity partners, or direct capital injections,” Gigaba said.
10. Roughly R57 billion allocated to free
tertiary education over medium term
will phase in fee-free higher education and training to students from poor and
working-class families,” Gigaba said.
Treasury, all new first-year students with a family income below R350 000 per
universities and TVET colleges in the 2018 academic year will be funded for the
full cost of study. This will be rolled out in subsequent years until all years
of study are covered.
Returning NSFAS students at university will have their
loans for 2018 onwards converted to a bursary.