Taxpayers slapped with the highest marginal tax rate since 1994

Following the 2017 budget speech in South Africa, taxpayers are facing the highest marginal tax rate since 1994. Bernard Saxe, Tax Partner at Mazars, discussed the implications of Finance Minister Praveen Gordon's budget on CNBC Africa. Saxe highlighted that while the new top bracket targeting individuals earning more than 1.5 million rand will bear the brunt of the tax burden, the general population will also feel the impact due to the absence of adjustments to compensate for bracket creep. With a tax shortfall of approximately 30 billion rand, the minister had to distribute the burden across the board, affecting all taxpayers. The impending change in the pricing of petrol, with VAT set to increase from zero percent to the standard rate of 14 percent, will further strain consumers' wallets. Public transport prices may also rise as a result of this adjustment. In addition to the changes in personal income tax, Saxe addressed the confusion surrounding the dividend withholding tax rate, which currently stands at 20 percent. This tax, collected by companies on dividends paid to shareholders, has seen a significant increase since 2012. The shift from a secondary tax on companies regime to the current dividend withholding tax has more than doubled the tax shareholders must bear over the past five years, impacting investors and potentially reducing the incentives for individual shareholding. While corporate tax rates remained unchanged at 28 percent, Saxe emphasized the importance of not increasing this rate to maintain competitiveness in the global market. With corporate tax rates decreasing worldwide, raising the rate in South Africa could have deterred foreign investment and hindered economic growth. Saxe's insights shed light on the intricate balance required in tax policy to support revenue generation while fostering a conducive environment for business growth and investment. As South Africans grapple with the repercussions of the 2017 budget, it is clear that the tax changes introduced will have a widespread impact on individuals, investors, and the business community. The need for prudent fiscal management and strategic tax planning has never been more critical, as stakeholders navigate the evolving landscape of taxation and economic realities.