A can of your cooldrink will cost you a little more in next year, thanks to the introduction of a tax on sugar-sweetened beverages that was announced by Minister of Finance Pravin Gordhan.
The Minister delivered his budget speech yesterday in Parliament and as expected sin tax is going up as well, meaning that the prices on alcoholic beverages and tobacco products are increasing.
Motorists will also have to dig deep into their pockets when fuel goes up by 30c per litre to R2,85 per litre for petrol and R2,70 per litre for diesel in April.
Gordhan’s speech also focused on clamping down of government expenditure by R25 billion over the period of three years, raising tax venue and pumping more money on higher education following the #FeesMustFall protests.
Economist Dawie Roodt wasn’t too impressed with Gordhan’s announcement on the proposed public sector spending cuts that will see new guidelines to limit the value of vehicle purchases for political office bearers, for instance.
“Well, the Minister made an announcement that they’re going to cut back on items like travelling… That’s not going to make much of the difference because that’s not where the real big money goes to,” he told YOU.
“It sound good to do that but that’s just a drop in the ocean,” he adds.
He’d also like to see parastatals like South African Airways that aren’t making a profit become privatised.
Debt Rescue CEO, Neil Roets, is not assured that the Minister’s budget speech that the economy will grow significantly enough to prevent a downgrade.
“Rating agencies including Fitch and Standard and Poor’s have all warned that South Africa’s bonds could be reduced to junk status if the economy was not better managed. Should this happen it would lead to an inevitable interest rate increase which would have a severe impact on deeply indebted consumers,” Neil says.
Here are some of the key points from yesterday’s speech — and what they mean for you and your pocket:
1. Income tax
Most people can breathe easier thanks to a personal income relief of R5,5 billion.
This is a bid to cushion inflation for lower- and middle-income earners but unfortunately experts believe it’s not going to have a great impact due to the high cost of products.
“It’s not going to make much of a difference to most of us. Usually, they’ll be a reduction in income taxes but it’s for the very low-income taxes,” Economist Dawie Roodt says.
Read more: Free online calculator shows how much tax you’ll have to pay
2. Medical aid
There’s an increase in the monthly medical tax credit allowance. You’ll pay more for your medical purposes, but there’s a benefit because it lowers your tax deductions, Roodt explains.
An increase of 30 cents a litre in general fuel levy. The general fuel levy will be raised by 30c per litre to R2,85 per litre for petrol and R2,70 per litre, effective April 6, 2016. “Consumers with heavy debt loads are going to feel the increase in the fuel price the worst,”Debt Rescue CEO Neil Roets says.
4. Sin tax
Consumers will pay more between 6% and 8% more on spirits, wine, beer and cigarettes.
According to Fin24’s sin tax calculator, in 2016/2017, your sins will cost you an additional:
R3,94 a week and R204,88 a year if you drink one bottle of spirit a week
R0,48 a week and R24,96 a year if you drink two bottles of wine a week
R0,22 a week and R11,44 a year if you drink two bottles or cans of beer a week
R8,20 a week and an extra R426,40 a year if you smoke 10 cigarettes a week
5. Other taxes
An introduction of a tyre levy to finance recycling programme is to be implemented.
“Next time you change your tyres you’ll pay an extra tax on that,” Roodt said. According to a financial journalist, Maya Fisher-French, a tyre levy of R2.30/kg on new, used or retreaded tyres that are imported will have to be paid.
Citizen will also fork out more in plastic bag levy and motor vehicle emission tax. South African Revenue Services says, the objective of this levy is to influence the composition of SA’s vehicle fleet to become more energy efficient and environmentally friendly.
6. Invisible tax
“While there were no implicit income tax increases, fiscal drag will put R7,6 billion into the pockets of the Receiver of Revenue this year,” Fisher-French wrote on her blog.
“Basically, anyone earning more than R400 000 per annum had very little tax adjustment for inflation so although the take-home pay will not be less in nominal terms, you will be able to buy less than you did last year.”
7. Fizzy drinks
The Minister is introducing a tax on sugar-sweetened beverages as of next year. The cost of fizzy drinks prices will go up but your health will thank the Minister.
“Sugar tax will in principle support human health. This will lead to a decline in sugar usage, resulting in lower domestic sugar prices which will have a negative impact on the sugar industry,” Absa’s Senior Agricultural Economist, Ernst Janovsky told News24.
Those who can afford to buy properties worth over R10 million will be expected to pay more transfer costs from 11% to 13%. It means the buyer will pay close to R1 million of transfer cost for property that costs R10 million.
“Much of what we heard today, save for the hike in the transfer duty for the R10 million-plus housing sector and rise in Capital Gains Tax (CGT) is positive,” Samuel Seeff, chair of the Seeff property group told News24.
9. Undisclosed Assets
Time is now running out for taxpayers who still have undisclosed assets abroad, the Minister said. Additional relief will be offered for a period of six months, from October this year, to allow non-compliant taxpayers to regularise their affairs.
10. Social grants
The old age, disability and care dependency grants will rise by R80 to R1 500 in April 2016 and by a further R10 to R1 510 in October. The child support grant will rise by R20 to R350 in April and the foster care grant by R30 to R890. “Poor households may benefit but only but only a little bit,” Roodt adds.
11. Higher education
An injection of R16,3 billion has been allocated for higher education over the next three years. R5,7 billion of this addresses the shortfall caused by keeping fees for 2016 academic year at 2015 levels and R2,5 billion goes to the National Student Financial Aid Scheme to clear outstanding student debt, along with a further R8 billion over the medium term to enable current students to complete their studies.
Roodt believes that even though there’s a high demand for higher education in South Africa, this will afford more poor students to go to university.
What do you do when you find yourself in debt?
According to the latest statistics released by the National Credit Regulator just less than 50% of all credit-active consumers are over-indebted, as they are in arrears for three months or more on at least one of their accounts, Roets says.
“It’s imperative to draft a budget (taking into account your income, deductions, expenses and monthly debt repayments) and stick to it,” Roets advises.
“As soon as you find yourself in a situation where your debt is overwhelming, seek help as soon as possible by contacting a debt counsellor.
“Your debt counsellor renegotiates your debt repayments with your credit providers, ensuring you are protected from any new legal action.”