High to middle income earners and consumers of alcohol and cigarettes suffered the brunt of the pain meted out by the government in the 2015/16 Budget speech, but the government also made important strides to simplify tax compliance for small businesses, said Deloitte on Wednesday.

Additional sources of tax revenue might have been increases in the VAT rate or the corporate tax rate but these have remained unchanged and the burden has been placed on individual income taxpayers – who contribute the most tax revenue already.

An increase in taxes amounting to R17 billion in 2015/16 was announced amid a drastic shortfall in tax revenue. While about half of this being returned to low-income earners to compensate for fiscal drag, tax director at Deloitte, Billy Joubert, said a one percentage point increase in tax rates was a surprise because it would be applied to all taxpayers except those in the lowest bracket (earning below R181 900).

“There has been much talk of a super tax on the wealthy, but following poor results in countries like France, which saw its 75% “millionaire’s tax” flop and also in the UK  this has not happened and instead there is a shift to burden many middle-income earners too.
Mr Joubert said the move to increasingly target wealthy individuals was not unexpected, as similar moves had been made elsewhere. For example, South Africans with property in the UK will from April next year be liable for UK capital gains tax there of 28%, which is far higher than the 13.3% they are charged in SA.
“It is certainly not a good news Budget for consumers and higher-earning taxpayers, but they have managed to narrow their fiscal deficit and I am glad he really took aim at containing government spending too,” he said.

A more generous tax regime was proposed for micro businesses with a turnover below R1 million a year, with the maximum turnover tax rate dropping to just 3% from 6% before and qualifying businesses with a turnover below R335,000 not being required to pay tax.

To complement this relief, SARS is establishing small business desks in its revenue offices to assist in complying with tax requirements.

The rates and brackets for transfer duties on the sale of property will be adjusted to
provide relief to middle-income households. The new rates eliminate transfer duty on
properties below R750 000, while the rate on properties selling for more than R2.25 million will increase significantly. The highest rate of transfer duty goes to 11% (from a maximum rate of 8%).

A lower oil price created fiscal space for 2 increases in fuel levies. An increase in the general fuel levy of 30.5 cents a litre will take effect in April. There is also an increase in the RAF levy of 50c per litre – meaning that a litre of fuel will cost consumers 80.5c more. Any sudden reversal in the downward trend of oil prices could make these additional levies inflationary and unaffordable.

Adding to the challenges facing consumers, a temporary increase in the electricity levy, from 3.5c/kWh to 5.5c/kWh was announced, with the increase only to be withdrawn when the electricity shortage is over.