Lightbulbs, plastic bags and vehicles – under the radar taxes South Africans should know about

Finance Minister Tito Mboweni’s 2020 Budget Speech was delivered against the backdrop of bleak economic growth and a growing fiscal deficit.

As a result of these current issues many commentators anticipated wide-ranging tax increases.

“However, as pointed out in National Treasury’s Budget Review 2020, despite large tax increases over the past five years, the difference between projected and collected revenue has continued to widen,” said Delia Ndlovu, managing director of Africa Tax & Legal at Deloitte.

“This is attributed to slow economic growth and a weakened South African Revenue Service (SARS). As a result, it is believed that further substantial tax increases are unlikely to be effective as it is conceded that South Africa already has a relatively high tax-to-GDP ratio compared to similarly developed countries,” she said.

“Accordingly, government will not raise additional revenue from tax proposals for 2020/21. Therefore, it seems clear that the strategy for addressing South Africa’s burgeoning debt levels is focused on containing public expenditure rather than raising taxes.”

Despite this change in strategy, there are a number of smaller tax changes which flew under the radar for many South Africans.

The tax team at Deloitte outlined some of these changes below.

  • Electronic cigarettes – Government plans to tax electronic cigarettes in 2021 due to concerns about health effects.  Treasury will also introduce a new category or tariff subheading for heated tobacco products in the schedule of excise duties, to be taxed with immediate effect at a rate of 75% of the cigarette excise rate;
  • Carbon tax – The carbon tax rate will increase by 5.6% for the 2020 calendar year. The carbon tax rate will thus increase from R120 per tonne of carbon dioxide equivalent to R127 per tonne of carbon dioxide equivalent;
  • Levies on plastic –  Government proposes to the raise plastic bag levy from 12 to 25 cents with effect from 1 April 2020. A review of the current levy, including a clarification of the tax treatment of compostable bags, will be undertaken;
  • Purchase tax on motor vehicle emissions tax – Vehicle emission tax will increase with effect from 1 April 2020 in line with global standards and shift to fuel-efficient cars.
  • Incandescent global tax – Government proposes to increase the incandescent light bulb levy with effect from 1 April 2020 to encourage the uptake of more energy-efficient light bulbs;
  • Transfer duties – The brackets to calculate transfer duties will be adjusted for inflation from 1 March 2020. From 1 March 2020 no transfer duty will be payable on the purchase of property with a value below R1 million;
  • Tax-free savings – The annual contribution limit to tax-free savings accounts is to increase by R3,000 per annum to R36,000 per annum from 1 March 2020;
  • Expat tax – The exemption of foreign remuneration earned by South African residents is to be adjusted to R1.25 million from the current proposed exemption of R1 million from 1 March 2020. The tax on foreign remuneration is due to be implemented for the first time on this date.

Read: New tax changes aimed at stopping people from leaving South Africa

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Lightbulbs, plastic bags and vehicles – under the radar taxes South Africans should know about