The commission said that government should also take cognisance of its fiscal sustainability when overspending to smooth over people\u2019s consumption pattern.<\/p>\n
To avoid adding pressure on the economy suffering under Covid-19, the government has withdrawn its initial proposal to increase taxes in the 2021 budget.<\/p>\n
Instead, tax relief was issued through the higher-than inflation adjustment in the tax brackets for PIT at 5%.<\/p>\n
“It is anticipated that the tax relief created will encourage spending and stimulate economic growth with some returns on VAT so that government can meet its expenditure needs,” the FFC said.<\/p>\n
Burden\u00a0<\/b><\/p>\n The annual change between the tax proposals is generally implemented by adjusting the income tax brackets to account for inflation.<\/p>\n “This provides valuable insight into whether the tax policy is consistent and progressive in structure,” the FFC said.<\/p>\n “The data shows three interesting facts about the revenue proposal of 2021 relative to the 2020 proposal, notwithstanding Covid-19.”<\/p>\n This suggests that the new tax proposal is progressive, as higher-income earners receive less tax relief and pay more taxes.<\/p>\n However, the lack of uniformity and consistency of tax relief could be a matter of concern, the FFC said.<\/p>\n “In particular, income earners in the highest income category, who earn at least R2 million per annum, receive more tax relief than those who earn less than R2 million, resulting in a regressive or counter-progressive trend between the two income groups,” it said.<\/p>\n “Therefore, to maintain structural progressivity, consistency and \u2013 ultimately \u2013 the overall effectiveness of the tax system, it is advisable for the tax relief system to follow a more uniform approach with a consistent trend in the revenue proposals\u2019 tax relief.”<\/p>\n![\"\"](\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2021\/06\/Tax-1.png\")
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