The big tax change for South Africa that flew under the radar

 ·22 Feb 2024

While much focus on the 2024 budget speech was given to ‘small’ tax hikes and purported ‘relief’ from not increasing fuel taxes – a big announcement that flew under the radar is that tax brackets will be frozen for the next three years.

This means that South African taxpayers will be slowly and quietly boosting the government’s revenues while getting zero relief from the impact of inflation on tax until after the 2027 tax year.

According to finance minister Enoch Godongwana, the government will boost its tax revenue by R15 billion in the coming year by tapping little taxes where it can.

Arthur Kamp, Chief Economist at Sanlam Investments, noted that this is generally bad news for South Africans earning an income – but also bad news for companies and businesses who will also be subject to new revenue-raising measures from a government desperate to plug the gaps in the budget.

“The personal income tax revenue raising measures (in the budget) are material,” Kemp said.

“The Budget indicates there will be no inflationary adjustment to tax brackets and rebates, or for medical tax credits over the next three fiscal years.

“This effectively increases personal income tax by a cumulative R58.2 billion over the previous medium-term projection. There is at least some relief in that the general fuel levy will not be increased over the next three years, although excise duties are being raised,” he said.

Theuns du Buisson, an economic researcher at the Solidarity Research Institute (SRI), said that Godongwana failed to mention this in his speech, despite it having a very real and material impact on the lives of hard-working South Africans, who “would once again have to foot the bill on behalf of the state”.

“For the first time in quite a few years, it is now again possible that a salary increase can result in a person landing up in a higher tax bracket, the reason being that the tax bracket does not increase along with the salary increase.

“Therefore, ordinary salary earners will once again have to bite the bullet as a result of the state’s mismanagement,” Du Buisson said.

It is notable that medical aid tax credits have also been frozen – however, most commentators have expressed a degree of relief that the credits persist at all, given the government’s push to implement the National Health Insurance, which will see the rebate ultimately being retired and the money instead being passed onto the scheme.

Instead, the NHI got a R1.4 billion slice of the budget from the wider health budget, which, while disappointing to critics of the scheme, has been noted as a small “affirmation” – but hardly a full commitment to the policy.

Read: How much you will be taxed in South Africa in 2024 – based on what you earn

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