What Gordhan’s 2017 Budget means for ordinary citizens

Finance Minister Pravin Gordhan delivering his 2016 Mid Term Budget Speech in Parliament, Cape Town.26/10/2016 gcis

Gordhan wants an extra R28 billion this year to fill the coffers, with the aim of spending R1.56 trillion in 2017/18.

Angry university students demanding their promised free education, a wishy washy rand, only 13% of South Africans who are paying tax and a R2.2 trillion debt.

These factors – and many more – all came into play in Finance Minister Pravin Gordhan’s budget speech on Wednesday.

What he didn’t say when he announced a 45% supertax on the super-rich was that people earning upwards of R500 000 per annum are already paying 64% of the income tax being paid by the 13% of the population.

The middle class – earning between R70 000 and R500 000 a year – contribute the other 36% of income tax.

People earning up to R70 000 a year are exempt from income tax.

Gordhan wants an extra R28 billion this year to fill the coffers, with the aim of spending R1.56 trillion in 2017/18.

It’s not only the super-rich who will feel the pinch; it’s anyone who drives a vehicle who will pay 30c a litre more in the general fuel levy and 9c a litre more towards the Road Accident Fund.

The knock-on effect of this is a rise in food prices as deliveries to supermarkets become more expensive and farmers’ costs increase.

READ MORE: Gordhan speaks out against ‘attacks’ on his department

Now would also be the time to decide if sin taxes are still affordable, as increases in the excise duties for alcohol and tobacco are expected at between 6% and 10%, making your average can of beer R4.50 more expensive and adding more than R1 to the cost of your favourite pack of smokes.

A R30 billion shortfall in the 2016/17 tax collection came mainly from personal income tax, value-added tax and customs duties, Gordhan noted.

“For many years, we have enjoyed the benefit of tax revenue collections outstripping economic growth. This contributed to our capacity to expand public service delivery,” Gordhan said.

“This year, revenue has lagged behind the economy, leading to a R30 billion shortfall by comparison with the budget estimate a year ago.”

Gordhan reflected that the revenue shortfall reflected slower growth in wages, employment and bonus payouts last year, among other factors.

“Our current expectation is that total tax revenue for 2016/17 will be R1.144 trillion, which is an increase of 7% on the previous year,” Gordhan said.

“Relief will be provided in the affordable housing market through an increase in the threshold above which transfer duty is paid, from R750 000 to R900 000. The annual allowance for tax-free savings accounts will be increased to R33 000.”

The medical tax credit would be increased in line with inflation this year, said the finance minister, noting the subsidy could be reduced in future in order to help financing National Health Insurance.

For those with a sweet tooth, the bitter reality of a sugar tax would be implemented later this year, once the legislation is passed, Gordhan said.

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