Gordhan raises taxes without raising eyebrows
25 February 2016
Posted by: Author: SAIT Technical
Author: SAIT Technical
Although tax hikes were
widely expected and feared, Finance Minister Pravin Gordhan decided to raise an
additional R18.1 billion subtly.
Instead of choosing to
target personal income tax increases or politically unpopular VAT increases,
Gordhan will raise around R7.6 billion of revenue through offering "limited
relief for fiscal drag”.
In other words tax
brackets, particularly those of high income earners, will not go up by as much
as inflation is set to rise. This means that if you received an inflation
related salary increase for this year, you may end up paying more in tax. Not
because the overall tax rate increased, but rather because PAYE tax tables will
not be adjusted at the same rate as inflation.
painful increase for higher income individuals is a hike in capital gains tax
(CTG), which is expected to increase from 13.7 per cent to 16.4 per cent for
individuals and from 18.6 per cent to 22.4 per cent for companies.
So called loan trusts have
also come under the spotlight. Previously, in order to avoid donations and
estate tax, an individual could set up a trust that would buy the assets of
said individual using an interest free loan that the individual provided to the
The minister has indicated
that government will categorise interest free loans offered to trusts as
donations, and it aims to ensure that assets transferred by an individual
through a loan to a trust are included in the estate of the founder when they
The finance minister once
again targeted his favourite go to taxes: excise, fuel levy and environmental
taxes are also set to rise, with a new sugar tax announced. These taxes are
expected to raise a total of R9.5 billion in revenue.
Through his subtle
increases, the minister has done well to not upset the political applecart with