New tax bill might not bring much respite for South Africans

In light of the new tax bill passed by the National Assembly in South Africa, senior executives at Tax Consulting SA claim that the new measures do little to ease the pressure on individual South African taxpayers. This is despite the fact that some concessions have been introduced in the act.

The new bill is yet to be enacted, and is subject to approval from the National Council of Provinces. A number of changes have been proposed to the current tax framework, which are not expected to have a significant impact on the welfare of the average South African taxpayer.

Tax pressure among South Africans has been particularly high in recent years, as the government has relied on a combination of increasing tax rates and expanding taxation legislation to help ease the burden on government coffers. Even South Africans living abroad have been hit with heavy charges on their income.

The heavy taxation has been a result of high default rates, although the policy has done little to improve economic conditions in the country. Businesses are struggling under the heavy tax regime, while the country’s investment grading has also suffered considerably. Thoman Lobban, Jean du Toit and Jonty Leon of Tax Consulting SA have explained what the new policies mean.

“This is peculiar, since the prevailing budget deficit is a massive elephant in a room with grim economic prospects and a junk credit rating. However, taxpayers must not be fooled. In the current economic climate and with SARS so far behind on collection, it is unlikely that the 2019 legislative cycle would not have been put to good use the drum up some more money,” they said. 

The executives also warned that the “bracket-creep” is set to make itself known in the country, given that the tax rates have remained relatively unchanged but inflation rates in South Africa are particularly high.

“In fact, in many cases taxpayers may be pushed into a higher tax bracket. The upshot is the taxpayer’s pay increase is wiped out by additional taxes. While this will not necessarily affect lower income earners, it will certainly have a significant impact on the already overburdened taxpayers in the middle- and higher-income brackets,” said the firm.