INDIVIDUALS will have to tighten their belts this year, as the effect on their cash flow of the R9.3bn in tax relief announced in Wednesday’s budget will be minimal once inflation has been factored in, tax experts said on Thursday.
Changes to the way foreign company interest will be taxed is seen as the "next big thing" for the government in its drive to collect more revenue. "The tax relief is aimed at really low earners and the fuel-levy increases from April will wipe out any benefits," the project director for tax at the South African Institute of Chartered Accountants, Piet Nel, said on Thursday.
"Relief is only coming for people earning below R200,000, so all the others are not inflation-adjusted benefits," he said.
ENSAfrica executive in the tax department Ernie Lai King said South Africa had a very thin tax base because a small number of taxpayers still contributed a disproportionate share of tax. He said 69% of personal taxpayers, who had taxable incomes below R250,000 a year, contributed 17% of personal income tax and got 39% of the tax relief, while 2.4% of individual taxpayers earning more than R1m a year contributed 30.7% of personal tax.
"Individuals still contribute far more than companies as companies do not pay value-added tax — individuals do," he said.
EY tax director Vedika Andhee said individuals earning a taxable annual income of R200,000 could expect to take home only R106 extra a month.
"This additional disposable cash will probably be ‘consumed’ by the resultant increase in food prices likely to occur once the fuel levies increase on April 2," she said.
Mr Lai King said the government needed new money, which meant foreign direct investment.
"But we need to be open for business and be attractive for it. Mining will say, for example, we missed the boat, which is moving to Africa."
He said more foreign investment was needed, but in order to achieve that, a more enabling environment was necessary.
ENSAfrica executive in the tax department Ernie Lai King. Picture: FINANCIAL MAIL
INDIVIDUALS will have to tighten their belts this year, as the effect on their cash flow of the R9.3bn in tax relief announced in Wednesday’s budget will be minimal once inflation has been factored in, tax experts said on Thursday.
Changes to the way foreign company interest will be taxed is seen as the "next big thing" for the government in its drive to collect more revenue. "The tax relief is aimed at really low earners and the fuel-levy increases from April will wipe out any benefits," the project director for tax at the South African Institute of Chartered Accountants, Piet Nel, said on Thursday.
"Relief is only coming for people earning below R200,000, so all the others are not inflation-adjusted benefits," he said.
ENSAfrica executive in the tax department Ernie Lai King said South Africa had a very thin tax base because a small number of taxpayers still contributed a disproportionate share of tax. He said 69% of personal taxpayers, who had taxable incomes below R250,000 a year, contributed 17% of personal income tax and got 39% of the tax relief, while 2.4% of individual taxpayers earning more than R1m a year contributed 30.7% of personal tax.
"Individuals still contribute far more than companies as companies do not pay value-added tax — individuals do," he said.
EY tax director Vedika Andhee said individuals earning a taxable annual income of R200,000 could expect to take home only R106 extra a month.
"This additional disposable cash will probably be ‘consumed’ by the resultant increase in food prices likely to occur once the fuel levies increase on April 2," she said.
Mr Lai King said the government needed new money, which meant foreign direct investment.
"But we need to be open for business and be attractive for it. Mining will say, for example, we missed the boat, which is moving to Africa."
He said more foreign investment was needed, but in order to achieve that, a more enabling environment was necessary.
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