The Minister of Finance, Tito Mboweni, delivered the 2019 Budget Speech on the 20th of February 2019. An election-friendly budget, a “lipstick” budget, a “trying to please everyone” budget, a union-friendly budget, a really tough budget – just some of the terms used to describe this years’ budget by various bodies and, of course, the man in the street!
Here are a few important highlights:
GENERAL
Total Income is expected to be around R 1.58 trillion and spending is estimated at around R 1.83 trillion – thus there is. Yet again, an anticipated budget deficit of about R 243bn !!
The consolidated budget deficit is projected to narrow from 4.5% of GDP in 2019/2020 to 4% in 2021/2022
Gross debt is expected to stabilise at 60.2% of GDP in 2023/2024
The economic and revenue outlook has deteriorated since the October 2018 Medium Term Budget Policy Statement
Revenue Collection declined – shortfall is now estimated at R 42.8 billion
Major contributing factors – poor tax administration and economic weakness
Funding Pressures from SOE’s (state-owned enterprises) have increased dramatically – but something had to be done as the current situation is not sustainable so a “support” package has been committed to
The budget proposes tax increases of R 15 billion in 2019/2020 and R 10 billion in 2020/2021 relative to the 2018 Medium Term Budget Policy Statement estimates
The additional revenue in 2019/20 will be raised primarily from limiting relief for the effects of inflation on personal income tax
Zero-rated VAT items will in future include white bread flour, cake flour and sanitary pads - from 1 April 2019
Planned Carbon Tax will now be implemented - 1 June 2019
Excise duties on alcohol and tobacco products increase by between 7.4% and 9%
Fuel levy increases by 29c per litre (general – 15c, road accident fund – 5c, carbon taxes – 9c)
The government has allocated R 567 billion for social grant payments. In 2019, the grant values will increase as follows:
R 80 increase for old age, disability, war veterans and care dependency grants
R 40 increase for the Foster Care grant
R 420 in April and to R 430 in October for Child Care grants
As a result of no change to the income tax brackets, (ie to cater for inflation) Government will raise R12.8 billion
Visa requirements are being relaxed to make it easier for “much needed and appreciated” tourists to visit South Africa (and to invest !)
THE "LET'S WAIT AND SEE" STUFF
No salary increases – for certain Government Departments/entities.
Over time, to reduce the “bloated” labour force in Government
Offer early retirement packages – this will be expensive but will yield large savings over the next 3 years
Curbing government debt – not easy when we are constantly having to borrow money to keep afloat
Fix the issues at SARS (ie IT systems, appoint a new commissioner and reopen the Large Business Centre)
No “bail-outs” for ailing SOE’s – only “support”, but with strict conditions like assigning “Big Brothers” and “Overseers” to keep an eye on the financial activities
Clampdown on the illicit tobacco industry – we have already seen some significant movement on this front
Getting municipalities to pay their dues to Eskom – another challenge, when most of them can’t even pay their normal monthly commitments
Creating a more business-friendly environment to do business in SA – this has to be an ongoing priority
Encourage Equity Partners – private sector partnerships. If structured and managed properly these initiatives can be of huge benefit
WHAT HASN'T CHANGED
Trusts other than special trusts – 45%
Dividends Tax – 20%
VAT – 15%
Company Tax – 28%
Retirement Fund lump sum withdrawals and Retirement Fund lump sum benefits and severance benefits – tables remain as is
Employer-owned vehicles and Travelling Allowances – remain unchanged
Exempt-Interest:
Under 65 years old – first R 23 800
Over 65 years old – first R 34 500
No change to annual permissible contributions to Tax-Free Savings Account
PAYROLL SPECIFIC
No changes to Personal Income Tax brackets – but this will catch up with everyone sometime during this year, even those at the lower end of the earnings scale, who traditionally always received some tax relief
Tax-free threshold increases from R78 150 to R79 000
Medical Tax Credits have not been increased – so belonging to a scheme will inevitably cost more
Interest-Free/Low-Interest loans remain as is
Re-imbursive rate per km (ie R 3.61) and the travel table remains the same
Subsistence Allowances:
R 435 p/d – meals and incidentals
R 134 p/d – incidental costs only
SARS published rates for international subsistence – see SARS website
Employment Tax Incentive (ETI) eligible income bands increased:
employers will be able to claim the maximum value of R1 000 per month for employees earning up to R 4 500 per month (previously R 4 000)
The incentive value will reduce to zero at the maximum monthly income of R 6 500 (previously R 6 000)
Effective from 1 March 2019
Various other processes will be reviewed to assist employers with the administrative functions required to manage the ETI scheme
TAX RATES FROM 1 MARCH 2019 TO 28 FEBRUARY 2020 INDIVIDUALS AND SPECIAL TRUSTS
TAX REBATES AND TAX THRESHOLDS
For more information on the above topic, please contact the LabourNet Helpdesk at
0861 LABNET (0861 522638).
Not yet a LabourNet client, but would like to know more about our service and products?
Email us: support@labournet.com
