The personal income tax relief outlined in Finance Minister Pravin Gordhan’s Budget speech is not enough to cover rising inflation, PricewaterhouseCoopers (PwC) said on Wednesday.
Accountant Christo Paxton said in a statement that while the personal income tax relief of R9.3 billion was welcome, the difference it would make to taxpayers’ pockets was limited.
About 40 percent of the tax relief went to South Africans earning below R250,000 a year.
“When comparing an individual’s tax liability who earns about R200,000 per year, the individual will have an additional R106 extra in their pockets every month.
“This barely covers the ever-rising cost of fuel and consumables.”
A person earning around R700,000 annually would have an extra R370 in their pockets each month.
“This is not quite enough to compensate us for the effects of inflation,” Paxton said.
Gordhan’s budget increased the tax-free, lump-sum amount paid out of retirement funds from R315,000 to R500,000, in favour of lower income members who did not benefit from deductible contributions.
PwC tax consultant Avisha Gajadhar said this was a generous increase of 58.7 percent.
“However, the top bracket did not increase substantially in comparison — increasing from R945,000 to R1,015,000.”
This amounted to a mere 19.6 percent increase.
“This is clearly in line with the government’s continued efforts to encourage individuals to save for retirement, particularly those in the lower income brackets,” Gajadhar said.