South Africans should brace themselves for an increase in personal income tax when finance minister Pravin Gordhan delivers his budget speech, PricewaterhouseCoopers has warned.
“We expect an increase in income tax rates by 1% across the board with the exception of the lowest band to spread the burden,” Tax Policy leader Kyle Mandy told reporters in Johannesburg on Tuesday.
“That will raise an additional R10 billion. It will be a fiscal address that will give the South African Revenue Services the required relief.”
Mandy was speaking to reporters ahead of the budget speech and looking at what the minister will announce to the nation.
He said the economy was under pressure and needed new ways to raise money. He said it would be too risky, however, to put all the burden on one group of tax payers.
“The possibility is there for them to introduce a new band that taxes 45% for those earning above a million Rand but we don’t expect that to happen because it would create a disincentive for those earning in that band.
“Those will outweigh any benefits. It will only raise an additional R5 billion. It’s not enough to raise the money required to address the shortfall that we have,” he said.
Mandy added that he did not expect to see an increase or reduction in company income tax. He said it would remain at 28%. VAT would also remain constant. He however suggested that treasury could look at securities taxes.
“Another possible avenue for treasury would be to up securities taxes from 0.25% to 0.5% to raise up to R5 billion in additional tax. Fuel prices are still relatively lower than compared to two years ago and perhaps that could be another enticing avenue for tax revenue,” said Mandy.
Smokers and drinkers can expect another steep increase in “sin” taxes that will be higher than inflation.