On 13 September 2018, the National Treasury released a draft response document to the Draft Rates Bill.<\/p>\n
The response document noted that National Treasury received 11 submissions related to the Bill – focusing on everything from the proposed Carbon Tax to changes to Estate Duty.<\/p>\n
However, one of the most interesting comments was the viability of a ‘flat income tax rate’ in South Africa, notes Cliffe Dekker Hofmeyr’s Louis Botha.<\/p>\n
“In the Draft Rates Bill, the primary, secondary and tertiary rebates were partially adjusted for inflation, and below inflation adjustments to the bottom three income brackets were proposed,” Botha explained.<\/p>\n
“Although none of the tax rates for any of the income brackets were increased, a comment was received noting that the tax burden on individuals is very high in South Africa.<\/p>\n
“Ordinary workers who earn R305,000 and above face abnormally high tax levels, especially after including fuel levies and indirect taxes. It was therefore proposed that a standard tax rate of 30% be imposed on personal income for all persons who earn up to R1 million and that an additional 25% be imposed on incomes above R1 million.<\/p>\n
In response, National Treasury explained that South Africa\u2019s personal income tax system is highly progressive, with over 25% of personal income taxes being collected from around 110,000 individuals who earn over R1.5 million<\/strong>.<\/p>\n “In contrast, around 1.8 million individuals earn less than R250,000 and contribute 8,6% of personal income tax revenue<\/strong>,” it said.<\/p>\n “Moving to a flat rate of 30% as proposed, would lessen progressivity and unless there is a high tax-free threshold, this would most likely result in lower tax revenues.”<\/p>\n
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