Speaking at the Budget Speech for 2015, Finance Minister, Nhlanhla Nene, voiced concerns regarding the deficit between the projected tax proceeds and government’s revenue requirements for the year ahead, despite the expenditure ceiling being lowered.
As a result, Nene announced that the gap would need to be bridged, which means that taxes would need to be increased. Aside from the usual increases in sin taxes, consumers will also have to deal with increases in the petrol price, electricity tariffs and personal income tax.
Adrian Goslett, Regional director and CEO of RE/MAX of Southern Africa, said that these increases are likely to put further financial pressure on households, especially considering that the majority of South African consumers are already dealing with high debt-to-income ratios. According to Nene, personal tax would be increased by one percentage point for tax payers who earn more than an annual salary of R181 900. This translates to taxpayers earning R200 000 a year, paying around R21 more per month. Those earning R500 000, will pay an extra R271 per month and those earning R1.5 million a year will pay around R1 105 more monthly. Essentially the net effect would be a relief for taxpayers earning below R450 000, while those earning more would be more affected.
Goslett notes that the electricity challenge that the country is currently facing is holding back economic growth, which is expected to be at around 2% for 2015, growing to 3% in 2017. It has been proposed that the electricity levy will increase from 3.5 cents to 5.5 cents per kilowatt hour. This increase of 2 cents will be withdrawn once the electricity shortage has been resolved. “The increase means that a household that uses around 500 kilowatts per month will pay a further R10 a month, which the minister believes should make a large impact in resolving the power shortage issue,” says Goslett.
He says that a very positive point that was announced was the adjustment in transfer duties on property sales. “No transfer duty will be paid on a property sold for below R750 000, which has been increased from the previous benchmark of R600 000. This will bring relief to property buyers who may be holding out on purchasing a property due to the numerous costs associated with a property transaction. While transfer duty on homes sold for R2.25 million and more will increase, no transfer duty on homes below R750 000 should help to stimulate demand for property in this sector of the market,” says Goslett.
The minister also pointed out that unemployment remains one the country’s biggest economic challenges and every effort will be made over the remainder of the year to increase the amount of jobs and employment opportunities. One of the ways in which government aims to achieve this is by spending R3.5 billion on small business development within the private sector. “More jobs means more people who are able to support their families and contribute towards the economy. Job creation will stimulate economic growth and contribute positively to all sectors,” says Goslett.
“Consumers will need to continue to make an effort to curb their spending and focus on reducing debt levels to be able to absorb the increased cost of living. This is particularly important for those who aspire to purchase a home during 2015,” Goslett concludes.
Alan Straton
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