South Africa’s finance minister has delivered the 2024 budget which seeks to squeeze more revenue out of taxpayers by taking aim at smokers and drinkers and not adjusting income tax brackets for inflation.
Finance Minister Enoch Godongwana said the new budget measures are aimed at collecting most of the additional R15 billion needed to balance the budget, raising personal income tax across the board.
Most of the additional R15 billion in revenue collected in the R1.73 trillion 2024-25 budget to “alleviate immediate fiscal pressures”, including costs of servicing the country’s R457.7 billion debt burden, will come out of the pockets of individual taxpayers, Finance Minister Enoch Godongwana announced during his budget speech on Wednesday.
“This budget contains tax measures that will raise R15 billion in 2024-25 to alleviate immediate fiscal pressure and support faster debt stabilisation. Revenue is mostly raised through personal income tax by not adjusting the tax brackets, rebates and medical tax credit for inflation,” Godongwana said.
Treasury economic tax analysis chief director Christopher Axelson said the government had explored but rejected raising VAT to 16% as an instrument to collect additional revenue.
“We do look at all the tax instruments when we need to raise revenue. We try to assess the distributional impact, the impact on the economy as well as administrative issues. The VAT rate was considered as one of the mechanisms, but it was not seen as a preferable one due to the potential distributional impact,” Axelson said.
“The non-adjustment to the brackets on the personal income tax system was seen as a more efficient way of trying to increase this additional revenue with better distributional outcomes and was the final option that was taken.”
At the lowest end of the personal income scale, people earning between R0 and R237100 a year will pay 18% tax, those earning between R237 101 and R370 500 will pay R42 678 plus 26% of taxable income above R237 000 and people earning between R370 501 and R512 800 will pay R77 362 plus 31% of taxable income above R370 500.
Those in the fourth highest tax bracket, who earn between R512 801 and R673 000, will have to fork out R121 475 plus 36% of taxable income above R512 800.
People in the highest income bracket, earning R1 817 001 and above, will be taxed R644 489 plus 45% of taxable income above R1 817 000.
Deepening the pain, taxpayers will not receive any increases to individual tax rebates, which remain unchanged at R17 235 for all individuals, with secondary rebates of R9 444 for people 65 and older and R3145 for those 75 years and older.