From the news desk

Why Budget 2019 will create more pain for taxpayers

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South African taxpayers will once again find themselves squeezed by the fiscus for a number of reasons, Bernard Sacks, tax partner at Mazars said in reaction to Budget 2019.

He explained that the most notable of these is the announcement that no changes will be made to the personal income tax tables and brackets.

“This means that the South African public will be confronted with the full force of ‘bracket creep’, as annual salary increases will likely result in many individuals moving into higher tax brackets and finding themselves being taxed significantly more as a result,” said Sacks.

In addition, no changes have been made to the monthly medical tax credits for medical scheme contributions. This measure will have a similar effect to bracket creep and is expected to raise a further estimated R1bn.

Mike Teuchert, national head of taxation at Mazars said none of the major tax categories saw any real changes that could help to alleviate the tax burden on consumers or companies, and no real measures were put in place to help stimulate foreign investment.

Tumisho Grater, economic strategist at Novare, said the tax revenue shortfall and new expenditure pressures required further tax policy and spending interventions.

She said that some of the main tax proposals for the 2019/20 financial year include increasing the tax-free threshold for personal income tax. Although no changes were made to personal income brackets, the government will raise R12.8bn by not adjusting income brackets for inflation.

Manty Seligman, director: asset management at GTC, commented that, “as always, the Budget speech included the usual increases in sin taxes and standard bracket creep methods to help fund the deficit”.

Carla Rossouw, tax manager at Allan Gray, said there has seen a shift in Budget 2019 from revenue collection to restoring the public’s confidence in the credibility of the revenue collector by prioritising the appointment of a permanent commissioner in the coming weeks, reinstating the SARS Large Business Unit and increasing the efficiency of tax collections by focusing on enforcement and embracing new technology.

Marc Sevitz, co-founder of TaxTim, explains that, since no adjustment has been made for inflation it means if you receive an increase from your employer, you will actually be paying more tax in real terms. So, just because inflation went up, doesn’t mean SARS lets you off the hook.

“You will essentially see the most minor increase in take home pay on your payslips each month from 1 March. The only good news here is that there was no tax increase,” commented Sevitz.

Taxpayers over 65 and below 75 years of age will have their first R122 300 tax free (previously it was R121 000) and those taxpayers over 75 years of age will be tax free from R136 750 (previously it was R135 300) of income.

“Super earners are still going to be taxed a whopping 45% per every R1 earned above R1 500 000 per year being at least R532 041, no change from prior year. Therefore, the biggest earners still pay the most tax each year,” said Sevitz.

Craig Pheiffer: Absa chief investment strategist, said households will be impacted by unchanged tax brackets – any added income in the new fiscal year from bonuses or salary increases will be taxed at the taxpayer’s marginal rate.

[source:  Fin24]
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