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#BudgetSpeech: Relief for lower earners, new sugar tax introduced

Pravin Gordhan announced a personal income tax relief of R5.5 billion, mainly on lower earners.

Finance Minister Pravin Gordhan. Picture: Thomas Holder/EWN.

JOHANNESBURG - Finance Minister Pravin Gordhan has announced a personal income tax relief of R5.5 billion focused mainly on lower and middle-income earners.

"We have paid special attention to the fairness and inclusivity of the tax system. We have also been mindful of the need to moderate the impact of tax increases on households and firms in the present economic context."

Gordhan is presenting his Budget speech in Parliament this afternoon.

WATCH: The budget in 60 seconds.

It has been described as the "most important Budget speech in post-apartheid South Africa", as the rand continues trade cautiously against the dollar.

There has also been an increase of 30 cents a litre in the general fuel levy.

In a surprise move, the minister introduced a tax on sugar-sweetened beverages; and increases of between 6 and 8.5 percent in the duties on alcoholic, beverages and tobacco products.

Gordhan praised South Africa for building one of the most effective tax authorities in the developing world.

"The Revenue Service has made huge strides over the past decade in enforcing the law, while providing assistance to small businesses and individuals. Public compliance with tax obligations is high."

The minister said his department would continue to act aggressively against the evasion of tax through transfer pricing abuses, misuse of tax treaties and illegal money flows.

He also said the Income Tax Act contains measures to encourage provision of bursaries by employers to employees or their relatives.

"It is proposed that the income eligibility limits and qualifying bursary values should be increased."

Gordhan announced that gains inclusion rates are proposed, together with an increase in the annual amount above which capital gains become taxable.

"The transfer duty rate on properties above R10 million will increase from 11 per cent to 13 per cent, and measures are proposed to strengthen the estate duty and donations tax."

STATE-OWNED ENTITIES

The minister acknowledged that state-owned companies have important roles to play in boosting growth and development.

He however conceded that there are issues to address in their governance, mandates, financing and operations.

Gordhan said where entities have overlapping mandates rationalisation options will be pursued.

"It seems clear that we do not need to be invested in four airline businesses. Minister [Lynne] Brown and I have agreed to explore the possible merger of SAA and SA Express, under a strengthened board, with a view to engaging with a potential minority equity partner, and to create a bigger and more operationally efficient airline."

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