The budget presented last Wednesday contained few surprises. The budget deficit needed to be addressed and to do this, taxes needed to be increased.
- The tax brackets were adjusted by less than the rate of inflation, or in the higher brackets, not at all, thereby generating more tax in real terms.
- The VAT rate was increased from 14% to 15% from 1st April.
- Estate Duty and Donations Tax both increased from 20% to 25% on amounts over R30 million.
- The usual increases were announced in sin taxes on tobacco and alcohol.
- The tax on luxury goods increased from 7% to 9%, and on motor vehicles from 25% to 30%.
- Fuel and road accident fund levies were increased by a total of 52 cents per litre.
The increases in tax were accompanied by the promise to reduce and re-prioritise Government spending.
A key point in the budget speech was the new sense of optimism, purpose and resolve.
The Zuma promise of free tertiary education for all has been modified into free education for poorer households, at an expected additional cost in 2018 of R12 billion. No allowance was made for further bail outs of State owned enterprises.
The offshore limits for retirement funds will be raised from 25% to 30% allow higher offshore exposures.
The budget was one where more money was required to balance the books, but contained welcome references to an improved environment, higher growth, reduction in wasteful Government expenditure and a fight against corruption. These matters are important, as tax morality is falling with taxpayers becoming less willing to fund corrupt and wasteful expenses.
The hope is that President Ramaphosa, in recognising that there is much to be done, is able to deliver on the promise.