On February 20, Finance Minister Tito Mboweni delivered the Budget Speech 2019 to Parliament. For individual taxpayers, businesses and the general public, there were many bitter pills to swallow as Mboweni faces the difficult task of improving tax revenue and placing additional tax burdens on individual taxpayers. For taxpayers, there were some significant announcements that will affect their taxes going forward.
Despite the announcement that there would be no increases to individual tax rates for 2019/2020, the minister also announced that there would be no adjustment to the individual tax tables to take the effects of inflation into account. As a result, taxpayers will now feel the effects of bracket creep, which means that even though the tax rate and brackets remain unchanged, an inflationary increase in your salary will increase your tax rate. The Treasury expects to collect an additional R12.8 billion as a result. This is expected to hit middle and upper-middle income earners the hardest.
Finance Minister Mboweni announced that the Health Promotion Levy (HPL), also known as the sugar tax, will be increased from 2.1 cents to 2.21 cents per gram of sugar per 100ml, with the first four grams exempted from taxation, on 1 April 2019. This is expected to hit the food and beverages sector hard and they now face greater pressure to reformulate to protect future earnings.
The minister was very clear that tax evasion would continue to be an area of focus and tax collection a priority with the South African Revenue Service improving its IT systems and integrating them internationally, which will mean that taxpayers have nowhere to hide. Currently, South Africans working abroad have a tax exemption in South Africa on their salary, provided they are physically present outside South Africa for more than 183 days – of which more than 60 days are consecutive during a 12-month period.
As from 1 March 2020, this will change and the tax exemption will be capped at R1m and expats will be taxed at a rate of 45% on anything they earn elsewhere in the world over R1 million.
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