In his mid-term budget speech last October, Finance Minister Pravin Gordhan said that the country would likely face tax increases of R13 billion in 2017.
And according to Patricia Williams, tax partner at Bowmans, the country’s middle to high-income earners will be the hardest hit by tax increases when Gordhan tables the national budget next month.
This follows the Davis Tax Committee’s second and final 2016 reports which recommended raising the lower marginal tax rates and the top tax rates, while reducing those in the middle of the schedule.
“The tax tables are routinely adjusted on an annual basis, to minimize the effect of bracket creep (also called fiscal drag), where the inflation-related increase received by a taxpayer pushes her or him into a higher tax bracket, resulting in higher taxes,” Williams said.
“One can therefore anticipate that the tax tables will not be adjusted fully for the bracket creep effect in 2017, and that we will most likely see the top marginal tax rates increase from 41% to 42%, at a minimum. This may potentially be accompanied by an increase in the lower marginal tax rates with some relief in the ‘middle’ rates,” she noted.
These increases appear to be in line with both the current African Tax Outlook report and previous annual changes and forecasts.
The tables below show how much more income tax you could be paying after the budget announcement in February, based on the official 2016/2017 tax brackets and rates as well as the effects of a possible increase of 1% (the minimum reported increase) to the current tax rate.
Increases to the lower tax brackets were not included, as analysts expect that they are unlikely to be affected by the budget announcement on 22 February.
Upper Tax Bracket minimum projected changes
R206,964 + 41% of taxable income above R701,300 according to 2016/2017 tax rates
|Yearly Income||2016/2017 tax rate (41%)||Estimated 2017/2018 tax rate (42%)||Estimated Difference|
|R701 301||R287 533||R294 546||R7 013|
|R850 000||R348 500||R357 000||R8 500|
|R1 000 000||R410 000||R420 000||R10 000|
|R1 250 000||R512 500||R525 000||R12 500|
|R1 500 000||R615 000||R630 000||R15 000|
Second upper tax bracket minimum projected changes
R147,996 + 39% of taxable income above R550,100 according to 2016/2017 tax rates
|Yearly Income||2016/2017 tax rate (39%)||Estimated 2017/2018 tax rate (40%)||Estimated Difference|
|R550 101||R214 539||R220 040||R5 501|
|R600 000||R234 000||R240 000||R6 000|
|R650 000||R253 500||R260 000||R6 500|
|R701 300||R273 507||R280 520||R7 013|
Third upper tax bracket minimum projected changes
R96,264 + 36% of taxable income above R406,400 according to 2016/2017 tax rates
|Yearly Income||2016/2017 tax rate (36%)||Estimated 2017/2018 tax rate (37%)||Estimated Difference|
|R406 401||R146 304||R150 368||R4 063|
|R425 000||R153 000||R157 250||R4 250|
|R450 000||R162 000||R166 500||R4 500|
|R500 000||R180 000||R185 000||R5 000|
VAT changes may still hit lower income earners
While all indications are that the planned tax increases should not impact low income earners, the VAT rate could see a long rumoured increase, said Williams.
The news isn’t all bad, however, as the VAT increases would be combined with certain specific exemptions or zero-ratings to offset the negative impact.
We could see the introduction of a third “luxury” VAT rating category (in addition to the 0% and 14% categories) of around 19%. however.