According to Shergeran Naidoo, Head: Stakeholder Engagements at BankservAfrica, on a month-on-month basis, BankservAfrica\u2019s seasonally adjusted take-home pay declined by 1.4% between September and August due to the backdated salary payments and higher personal tax increases.<\/p>\n
“Take-home pay increased in real terms for most of 2018 and we expect this to continue until the end of the year. However, 2019 could bring some change as inflation is expected to increase along with the continued poor growth performance of the South African economy,” said Mike Sch\u00fcssler, Chief Economist at Economistscoza.<\/p>\n
Very often higher inflation leads to salary increase lags and it takes a while for the two to catch-up. Although take-home pay does increase slightly above the inflation rate, other factors such as higher personal taxes caused by \u2018bracket creep\u2019 has an impact too, he said.<\/p>\n
According to Sch\u00fcssler, the average take-home pay increased by only 2.8% above inflation since September 2013, “as such, the average rate of increase is only around 0.5% year-on-year, and tells the story of an economy struggling to create growth and wealth,” he said.<\/p>\n
Gross salaries increased by around 4% in the last five years to June 2018 after inflation \u2013 approximately 1% faster than inflation for the five years to September 2018, according to BankservAfrica\u2019s estimates.<\/p>\n
“The difference between the two average rates of increase is down due to the rise in personal taxes that did not fully compensate for inflation as government struggles to increase revenue to balance the budget,” said Sch\u00fcssler.<\/p>\n
There is a strong possibility that this will be addressed in the upcoming Medium-Term Budget Speech on Wednesday, he said.<\/p>\n
The BankservAfrica Take-home Pay Index is a very useful tool for analysing the impact of taxation on employee income.<\/p>\n
For example, the BankservAfrica Take-home Pay Index shows the overall nominal take-home pay increased by 45.3% while personal tax collections increased by 70.6% since August 2013 to August 2018.<\/p>\n
“This clearly demonstrates that personal income tax has increased far faster than salaries,” Sch\u00fcssler said.<\/p>\n
While BankservAfrica\u2019s sample size is a third of that of SARS, the large difference shows that personal tax collections in effect show a far higher tax rate mainly via \u2018bracket creep\u2019.<\/p>\n
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