Budget Speech 2018

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%.

• An increase in the value-added tax (VAT) rate from 14% to 15%, effective 1 April 2018;
• A below-inflation increase in the personal income tax rebates and brackets, with greater relief for those in the lower income tax brackets;
• An increase in the ad-valorem (in proportion to the estimated value of the goods or transaction concerned) excise duty rate on luxury goods from 7% to 9%;
• A higher estate duty tax rate of 25% for estates greater than R30-million in value;
• A 52 cents per litre increase in the levies on fuel, made up of a 22 cents per litre for the general fuel levy and a 30 cents per litre increase in the Road Accident Fund Levy, and
• Increases in the alcohol and tobacco excise duties of between 6 and 10%.           

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:

• R1.22 more for a pack of 20 cigarettes
• 38 cents more for 25 grams of pipe tobacco
• R6.45 more for 23 grams for cigars 

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.

Staying VAT-free

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.