These are the tax changes you can expect in this week’s Budget, according to PwC
- Finance minister Tito Mboweni is set to deliver his maiden budget speech on 20 February 2019 as the state is struggling to find money.
- PricewaterhouseCoopers expects that fuel levies, estate duty and donations tax may be hiked.
- Medical scheme members may also feel more pain.
Tito Mboweni will deliver 2019's Budget speech on 20 February, his first ever as finance minister, in a very tough environment.
The economy is limping and government is not earning enough tax income to fund its expenses.
Last year, a number of nasty tax hikes - including in VAT, on sugar and transfer duties - were introduced. The tax experts at PricewaterhouseCoopers do not expect further increases in these taxes, and also not in the dividends, or personal and corporate income tax rates.
While there has been some talk of introducing a 'luxury VAT' rate on high-end goods, PwC doesn't believe this will be adopted due to the complexity it will introduce in the tax system.
But these changes may be included in next week's Budget:
Estate duty and donations tax
"There is a possibility that the rates of estate duty and donations tax could be increased once again," according to PwC. Raising the estate duty and donation tax "would serve as a counter to calls for a net wealth tax which is not viewed as ideal from a policy perspective".
The rate of estate duty on estates with a value above R30 million was increased from 20% to 25% last year.
The general fuel levy is expected to be increased by between 15 and 20 cents per litre, while the Road Accident Fund (RAF) levy is anticipated to be raised by at least 30 cents per litre. The RAF is struggling with massive liabilities, which are expected to grow to R393 billion by 2021/22.
The ballooning debt of the RAF would require increases to the fuel levy in each of the three years till 2021/22, according to PwC.
Securities transfer tax
Currently, securities transfer tax is levied at 0.25% on the transfer of shares. PwC says doubling the rate could raise additional tax revenues of approximately R5.9 billion - and also be seen as a progressive move as it's a form of wealth tax.
Excise duties, better known as the infamous "sin taxes" on tobacco and alcohol "have traditionally been a soft target for increased taxes".
However excessive increases in sin tax on alcohol and especially tobacco is feared to further worsen their illicit trade. The South African Revenue Service (SARS) lost a staggering R8 billion in taxes due to the illicit trade of tobacco in 2018.
Although an increase is likely, PwC says it won't be significant.
Medical scheme members to be hit
Below-inflation increases in medical tax credits over the following three years were announced in the 2018 budget as a measure to help government fund the rollout of the National Health Insurance (NHI).
A continuation of the policy is expected by PwC, meaning that medical aid members will get relatively less tax relief for their contributions.
For more go to Business Insider South Africa.
Receive a single WhatsApp every morning with all our latest news: click here.
Also from Business Insider South Africa:
- This MTN boss could make billions from the massive Brulpadda gas find – and e.tv’s owner could also benefit
- FNB clients have won more than R800 million in the Lotto by playing via the bank
- EskomSePush has exploded as SA's go-to load shedding app - it grew from 2,500 users to 400,000 in a week
- This is South Africa's most congested city – where commuters lose up to 5 days a year in traffic
- Watch: Scientists launched a fake shark near Cape Town, and accidentally attracted a real shark's attention
- This is what OR Tambo International airport will look like in 2020 - after phase one of its R4.5 billion Western Precinct development