Personal income tax brackets and rebates will rise 5 percent, which will bring relief to households by ensuring that inflation does not automatically increase the individual tax burden, the national treasury said Wednesday.
The Treasury Department announced the planned budget for the next three years, saying this adjustment will cut tax revenues by R2.2 billion. An earlier announcement to introduce tax measures to increase R40 billion has also been withdrawn.
It did so after many South Africans were unemployed due to the effects of the COVID-19 pandemic. Economic activity halted when the government imposed a tough lockdown in late March last year.
This led the government to introduce a R 500 billion welfare package to help households and businesses, among other things.
“Most of the relief goes to low- and middle-income households. If the tax tables had not been adjusted, this would have brought in R 11.2 billion.
“An inflation adjustment will apply to the value of medical tax credits, which will increase from R319 to R332 for the first two members and from R215 to R224 for all subsequent members,” the department said ahead of the 2021 budget submission.
According to Treasury, the minimum value for old-age pensions has not been adjusted since 2007/08. This value will increase from R7,000 to R15,000 from March 1st, 2021.
“To support the economic recovery, the government will not generate any additional tax revenue from this budget.
“Substantial tax increases in recent years have resulted in less than expected revenue because of their impact on taxpayer behavior and growth.
“Tax increases originally proposed in the June 2020 special adjustment budget will be withdrawn. Given the better-than-expected revenue trend in the second half of 2020/21, there is no longer any need to implement these measures, and their withdrawal will not increase the budget deficit.”
The expected loss of income is offset by an increase in excise taxes on tobacco and alcohol.
Meanwhile, the National Treasury said the government is proposing an inflation-related increase in the general fuel tax by 15 c / liter and an increase in the road accident fund tax by 11 c / liter above inflation with effect from April 7, 2021.
(With contributions from the press release of the South African government)