Income tax: This is what you’ll pay

No rate hikes, but no inflationary adjustment for top four income brackets.
Almost R7 billion will be collected via the personal income tax system in 2018. Picture: Shutterstock

National Treasury will raise almost R7 billion from the personal income tax system through lower-than-inflation increases to tax rebates and brackets, effectively collecting taxes by stealth.

However, it has acknowledged that further hikes in personal income tax rates could be counterproductive and has kept rates unchanged.

Against the background of the introduction of a VAT hike of one percentage point to 15% on April 1, many taxpayers will see their disposable income come under pressure in the coming tax year.

The bottom three personal income tax brackets (for lower- and middle-income earners) and the primary, secondary and tertiary rebates will be partially adjusted for inflation through a 3.1% increase, while the top four brackets will remain unchanged from March 1.

The table below sets out the changes.

South Africa’s personal income tax burden has slowly but surely increased from 8.3% of GDP in 2010/11 to 9.8% in 2017/18. In an effort to stabilise public finances and to enhance the progressive nature of the income tax system, government introduced a super tax bracket of 45% for individuals earning more than R1.5 million per annum in 2017. This was after personal income tax rates were increased by one percentage point in most cases in 2016.

“An additional personal income tax rate increase in 2018/19 would have greater negative consequences for growth and investment than a VAT increase. Moreover, significant shortfalls from this tax in 2017/18 suggest that further increases might not yield the revenue required to stabilise the public finances,” Treasury said in its budget review.

According to an analysis by PwC, the effect of the changes to the personal income tax rates will have the following effect at the various taxable income levels for taxpayers under 65:

Taxable Income

2018/2019 Tax Due

Change from 2017/2018

% Change

 

R100,000

R3,933

-R432

-9.9%

R200,000

R22,265

-R910

-3.9%

R500,000

R113,807

-R2,017

-1.7%

R1,000,000

R312,973

-R2,017

-0.6%

R1,500,000

R517,973

-R2,017

-0.4%

R2,000,000

R742,973

-R2,017

-0.3%

The table below highlights the relatively small tax base and the skewed nature of income distribution in South Africa.

Tax calculator

Annual income:
Age:
Under 65
65 or over
75 or over
Moneyweb is a financial, investment news provider and not a tax- or financial advice authority. Please contact Sars or a registered tax practitioner for any tax-related queries.

Read more from the 2018 budget speech

VAT increased to 15%

Eskom business model review kicked off

Budget 2018: 10 things you need to know

Fee-free higher education comes at a high cost

The come-hither budget

12 weird and wonderful facts about the 2018 budget

Read the complete 2018 Budget Speech

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In this land with it’s skewed income dispensation, high unemployment, extremely high social grant system, unaffordable over-stocked government employee compliment and massive government financial difficulties due to:
corruption, inabilities to manage government departments and SOE’s properly, over-promises and poor service delivery –
I guess the taxation adjustments is as good as S.A. citizens could have hoped for under the prevailing circumstances.

Now all hope is on a restructured cabinet, -government -SOE’s and elevated policies to lift S.A. out of the mud that the despot Jacob and his follower gang members has caused over the past nine years.

“An additional personal income tax rate increase in 2018/19 would have greater negative consequences for growth and investment than a VAT increase. Moreover, significant shortfalls from this tax in 2017/18 suggest that further increases might not yield the revenue required to stabilise the public finances” Treasury said in its budget review.

In other words the few people who are carrying the bulk of the tax burden are refusing to pay more and would have taken whatever steps are necessary to avoid doing so.

And so the naive poor and middle class are left with the tab?

I don’t get the 7.5 million registered individuals who earn R170 billion per annum.That’s R26000 p.a. on average.How do employers get away with paying such low wages?

End of comments.

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Moneyweb is a financial, investment news provider and not a tax- or financial advice authority. Please contact Sars or a registered tax practitioner for any tax-related queries.
 
 

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