The then finance minister Malusi Gigaba delivered his inaugural budget speech amid a tough economic climate, which saw him make difficult decisions to address a massive revenue shortfall of R48.2-billion and the funding of free higher education.
The main tax proposals for the 2018 Budget were:
Most surprising of all was the increase in value-added tax (VAT) — which has remained the same since 1993 — to 15%.
Most surprising of all was the increase in value-added tax (VAT) — which has remained the same since 1993 — to 15%. Thankfully, vulnerable households were protected from this increase through compensation of an above-average increase in social grants.
Another big change was the introduction of the health promotion levy, or so called “sugar tax”, which is an effort by government to control the high obesity rate in the country. Basically, it will tax all sugary drinks in an effort to encourage healthier choices among South Africans. Broken down, we will be paying an extra 41 cents for a 330ml can of our favourite cooldrink.
Happy Hour just got a lot more expensive!
Our guilty pleasures – the so-called sin tax – has been singled out once again for a price hike to raise revenue of R2.6bn. The current excise duty on malt beer, ciders and alcoholic fruit beverages is R86.39 a litre which will increase to R95.03 a litre. The excise duty on a box of cigarettes (20s) is currently R14.30 and will increase to R15.52. Drinkers of traditional African beer will enjoy a decrease of 5.5% as those duties remain unchanged.
For smokers, the following increases have been put into place:
For alcohol, the following charges were announced:
A 750ml bottle of wine will cost 22.5 cents more
A 340ml can of beer will cost 14.66 cents more
Cider will cost 14 cents more per 340ml
Spirits will be R4.80 more per 750ml bottle
Fortified wine will be 27.75 cents more per 750ml bottle
Increases in the general fuel levy and RAF (Road Accident Fund) levy
Motorists will have to fork out more when filling up their petrol tanks owing to increases in both the fuel and Road Accident Fund (RAF) levies.
The general fuel levy will rise by 22 cents per litre while the RAF levy increases by 30 cents per litre, resulting in a combined 52 cents in additional money that consumers will need to pay for each litre of fuel.
Increases to personal income tax
Tax measures introduced in the budget included no adjustments to the top four income tax brackets (high income earners), and below inflation adjustments to the bottom three brackets (low to middle income earners). See the table below.
The zero-rated foods which will remain VAT-free include certain basic foodstuffs, such as mealie meal, rice, bread (with the exception of low-GI bread and rye bread), vegetable oil, dried beans, fresh fruits, lentils, eggs, samp, powdered milk, certain tinned fish and fresh fruit and vegetables.
In a nutshell, you can expect to tighten your belt as you will be paying more tax on everything from your food to your fuel costs to your so called “sins”. The good news – the tax increases will allow for the South African dream of free higher education.