Hidden way government gets R20 billion extra from taxpayers WRITTEN BY Bianke Neethling

[Nat Quinn]

Hidden way government gets R20 billion extra from taxpayers WRITTEN BY Bianke Neethling

For the past few years, the National Treasury has not adjusted South Africa’s tax brackets for inflation, which usually adds around R20 billion to the government’s tax revenue.

Investec chief economist Annabel Bishop recently outlined her expectations for South Africa’s upcoming Budget Speech on 19 February.

She does not expect to see any changes in major tax rates, with value-added tax (VAT) and corporate and personal taxes likely to remain unaltered.

However, she warned that tax changes could take place in other, smaller areas.

Old Mutual’s research indicates that Finance Minister Enoch Godongwana could be faced with revenue that underperforms estimates by R22.3 billion.

Considering South Africa’s already overburdened tax base, the government will likely be looking to increase revenue through other measures.

One such measure Bishop believes South Africa will see in the upcoming budget is the government not adjusting the country’s tax brackets for inflation.

This gives rise to a phenomenon known as “bracket creep”, which happens when tax tables and deduction limits are not adjusted for inflation.

This makes taxpayers pay more, resulting in greater revenue without hiking rates.

In November 2024, the South African Institute of Chartered Accountants project director for tax advocacy, Lesedi Seforo, told 702 that this has allowed the government to add R58 billion to its tax revenue in the medium term.

Bishop said this will likely happen again this year.

“As has become the norm, no adjustment for bracket creep is expected, with the migration of taxpayers into higher income tax bands on inflation adjustments to their incomes not seeing relief,” she said.

“This tends to add around R20 billion to the tax take.”

However, this may not be the only way the government raises its revenue in the upcoming Budget.

In addition to bracket creep, Bishop said indirect taxes are expected to rise again as taxation on alcohol, tobacco and sugar taxes lifts, while the carbon tax could see a rise.

She added that a wealth tax has been mooted, but discussions around this have not necessarily progressed to implementation.

In an address to members of Parliament last year, the National Treasury confirmed that it is exploring the feasibility of a wealth tax.

Since then, advocacy groups have been pushing for early implementation, and economists have cautioned that such a tax on wealth could risk driving taxpayers away through emigration and tax planning strategies.

Old Mutual’s head of tax, Nazrien Kader, expects the National Treasury to alter the current regime’s ‘wealth taxes’, including –

• Donations tax – currently 25%

• Estate duty – currently a dual rate of 20% on the first R30 million and 25% thereafter

• Capital gains tax inclusion rate for individuals – currently 40%

Bishop also mentioned that customs and excise duty increases would reflect tariff adjustments.

She said this is needed for the longevity of South Africa’s steel industry, with cheap imported products having flooded the market, but the government has yet to institute these.

This has become increasingly urgent for South Africa, as the country’s largest steel producer, ArcelorMittal, plans to wind down its long steel business this year.

This could lead to thousands of job losses and devastate the local steel industry.

Bishop added that fuel and Road Accident Fund levies are often increased, although they were skipped in 2024 amidst rising petrol and diesel prices.

However, this year, the petrol price is more moderate, having seen price cuts from May 2024.

Automobile Association (AA) of South Africa CEO Bobby Ramagwede said they expect the levy on fuel to stay the same this year.

The association called upon the Finance Minister to keep the levy the same or to reevaluate the levy structure because the National Treasury already allocates sufficient amounts to road maintenance.

Ramagwede said the road transport budget of the previous year had already amounted to more than R140 billion.

Furthermore, he said additional levies will only increase consumer pressure.

Hidden way government gets R20 billion extra from taxpayers – Daily Investor

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