Income tax hike ‘unlikely’

Image courtesy of Stock.xchnge

Image courtesy of Stock.xchnge

Tax experts are unwilling to rule out the possibility of another income tax hike being foisted on the struggling middle classes in Finance Minister Pravin Gordhan’s upcoming Budget on February 26.

Personal income tax is the government’s main source of revenue, accounting for 34% of tax revenue in 2013.

Zweli Mabhoza, head of taxation services at SizweNtsalubaGobodo, says an announcement about a hike in personal income tax rates in the budget cannot be ruled out.

National Treasury and the SA Revenue Service (SARS) last year suggested they would focus on international transactions, transfer pricing, trusts and high net worth individuals.

Kyle Mandy, director and head of national tax technical at PwC, says any extras will probably be aimed at the top end and could take the form of an increase in the maximum marginal tax rate of 40%.

Mandy says depending on the rate, an adjustment could bring in anything from R2bn to R5bn.

According to the medium-term budget policy statement, projected gross tax revenue for the 2015 fiscal year is almost R1 trillion.

Low-income earners will likely see some relief while middle-income earners would be left untouched.

PwC expects tax relief to be limited to partial relief for fiscal drag in the form of increased rebates and adjustments of the tables – particularly for lower-income earners.

Mandy says an increase in personal income tax rates for wealthy individuals is unlikely at this stage – not because of the looming election – but largely since it is part of the Davis committee’s mandate to look at the levels of taxation in South Africa.




today in print