Money and Markets

These are the tax changes you can expect in this week’s Budget, according to PwC

Business Insider SA
Tito Mboweni
Finance minister Tito Mboweni is set to deliver his maiden budget speech on 20 February 2019. (Photo: Adrian de Kock)
  • 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. 

Fuel levies

(Business Insider South Africa)
(Business Insider South Africa)

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.

Read more: You are now paying 12% of every litre of petrol to the insolvent Road Accident Fund - its share has almost doubled in a decade

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


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: