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Gordhan raises taxes without raising eyebrows

Thursday, 25 February 2016   (0 Comments)
Posted by: Author: SAIT Technical
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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. 

Another potentially 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 trust. 

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 die. 

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 unpopular increases. 



Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.

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