South Africans need not worry about the "bracket creep" after budget announcments

14 March 2019 Consultancy.co.za

While the lack of alterations to tax brackets in tandem with inflation might appear to threaten the future income of a large portion of South Africa’s middle class, Tanya Tosen of Tax Consulting South Africa has urged that the volume of people and income affected by these policies will be marginal.

The South African government is making attempts of all kinds to restore the resource pool at the National Treasury. In last year’s budget, the government introduced a tax hike and the South African Revenues Service (SARS) subsequently stepped up the intensity in its prosecution of defaulters.

This year, the changes have been more widespread. Aside from the much debated expat tax – taxing wealthy South African expats who earn more than R1 million as much as 45% of their income – Finance Minister Tito Mboweni also announced in his budget speech that inflation would not have any impact on the tax brackets.

In essence, employees who’s salaries might have been increased to adjust for inflation will still move into a higher tax bracket if applicable. The policy has become a major cause for concern across the country, although Tanya Tosen believes that this concern is being amplified due to a lack of knowledge.

South Africans need not worry about the

“Only those few who are pushed into a new bracket will pay more tax, and not as much as they think,” said Tosen, summing up why she feels that there is no cause for concern. Those who are taxed, in accordance with the country’s progressive taxation policy, will be taxed partially only for the portion of their income that lies in the higher tax bracket.

According to Tosen, the solution to prevent concern of this sort from breaking out is to ensure that employees get the right advice when it comes to tax policies – something that Tosen believes should be taken up by employers.

“A person who believes they are getting less out because of so-called bracket creep may feel they’re working at a loss, We’ve found they are much more appreciative of their reward package when they have a good grasp of how tax affects their take-home pay,” she said, elaborating on Tax Consulting SA’s overview of the market.

Tax Consulting has been particularly vocal on the changes currently underway in the South African taxation system, making evaluations and predictions on possible changes and disseminating information on the nuances of tax hikes, expat tax and now the lack of adjustments on tax brackets.

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