On the 25th of February 2015, the Minister of finance, Mr. Nhanhla Nene delivered the National Budget speech address, which was met with mixed emotions.
Some questioned his methods (especially the raising of the fuel levies), while others praise his cautious and somewhat modest approach in these difficult times (himself even jokingly briefing journalists during interviews before the speech that it “would be a boring budget with no big surprises”).
Nevertheless, changes were made and tax rates amended. What may be most infamous about the 2015 Budget address is the massive 80.5c increase in fuel levies, which Nene seemed to get away with, understandably due to the big fall in oil prices, consequently also the local fuel prices.
What is worrying about this increase is what would happen should the oil price rise again, or the exchange rate of the Rand deteriorate even further. Approximately 40% of the price of fuel is due to the Government; needless to say this price affects nearly every other price, whether it be foods, luxury goods, etc.
The electricity levy has also been increased from 3.5c/kwh to 5.5c/kwh.
On the other hand, the personal income tax brackets for individuals have been reworked to adjust for fiscal drag, to the extent that those earning in the lowest income bracket will benefit from a tax relief, while higher income brackets will be taxed an additional 1%, Nene jokingly stating that “Rich people would lose out on one fancy dinner a year”. The 1% increase is also applicable to the tax rate for trusts, which will be set at 41%.
It seems that, while the rich are being taxed more, the exchange controls are being relaxed substantially (SA residents’ foreign capital allowances will increase from R 4 million to R 10 million per year, or R 20 million per family unit), meaning these rich people could take more and more money out of the country with ease.
Governmental spending has increased significantly (up by 7.9%), formatted in the following structure:
-> R647bn to be spent on basic education, including R36.7bn on school infrastructure
-> R634bn on local development and social infrastructure, including R145.5bn on municipal infrastructure
-> R502bn on health, with R46.6bn to be spent on the HIV/Aids conditional grant
-> R498bn on social protection
-> R197bn on post-school education and training
Sin taxes have also been raised, most notably an increase of 7c per beer and 82c per packet of 20 cigarettes.
On a more positive note, the transfer duty rates have been reworked to the extent that a property of up to R750,000.00 will now be exempt from transfer duty, a very welcome amendment to all property investors.
Another positive factor is the introduction of the tax-free investment or savings account. Essentially, all South African citizens or permanent residents will be entitled to invest in such an account. This will entitle them to invest up to R30,000.00 yearly (up to a maximum of R500,000.00 in their lifetimes) tax free, great news for all interested in investing.
This may been seen as an incentive from Nene to promote investment within South Africa.
All in all, the 2015 National Budget address was met (relatively) with open arms, as it addressed many issues South Africans and foreigners had previously had, as well as keeping the VAT rate unchanged at 14%.
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