On 22 February 2017, Finance Minister Pravin Gordhan presented South Africa’s biggest budget yet, providing for budgeted Government expenditure over the 2017/2018 fiscal year of R1.6 trillion (or R1,563,300,000,000!) Of this, by far the most significant portion will be spent towards social services to be delivered in the form of education, healthcare, social protection (grants), and local development and infrastructure: R884bn, or 56.5%, to be exact. A further R198.7 billion is being allocated to defence and public safety, with agriculture and economic affairs receiving R241.6 bn. General administration (departments such as Treasury, Foreign Affairs and the various legislative organs) is to receive R70.7bn of the 2017 budget, while it is further notable that little over 10% is allocated to servicing Government debt.
On the income side, taxes remain Government’s primary source of revenue, and budgeted revenue in tax collections are estimated to be collected as follows:
|Personal income tax||482.1||38.1|
|Corporate income tax||218.7||17.3|
|Customs and excise||96.1||7.6|
Direct income taxes, as have been the trend over the recent past, continues to be the major contributor to the Government purse at more than 55% and borne by those individuals economically active.
It was widely reported in the run-up to the budget speech that a shortfall in tax revenue of approximately R28bn would need to be provided for, and that the Minister would need to be creative in meeting this challenge and where he would raise taxes to cover this, especially considering that increased taxes inevitably acts as impediment to economic growth (estimated to reach 2.2% by 2019). The bulk of this additional R28bn to be collected will be received from the raising of the personal income tax and trust tax rate ceiling to 45% (R16.5bn), while the increased dividends tax rate raised from 15% to 20% is expected to raise a further R6.8bn.
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)