Gordhan talks #Budget2017 after the speech
The Finance Minister says that government is expected to spend R1.56 trillion in the coming year and is likely to collect just R1.41 trillion in revenue.
JOHANNESBURG – Finance Minister Pravin Gordhan broke down his 2017 Budget Speech which he delivered in Parliament on Wednesday.
News from the minister is that government is expected to spend R1.56 trillion in the coming year and is likely to collect just R1.41 trillion in revenue.
On growth and transformation, Gordhan says the aim is to get more South Africans to participate in the economy, and earning an income so as to contribute taxes – particularly income tax.
He says while tax systems around the world are likely the major redistributive mechanisms in society, in a country such as South Africa where there are large gaps in income, wealth and employment, more needs to be done to ensure the mechanism works.
Gordhan announced on Wednesday that South Africans earning more than R1.5 million per annum will be taxed 45% of their taxable income.
“Why this amount? We didn’t want it too high or too low…at this level we probably bring in somewhere between R3.5 billion and R4 billion, which is significantly of reasonable help when balancing the books.”
The minister says the increase is not to exploit the super-rich, but rather to address the issue of the maldistribution of wealth in the country.
WILL THE BUDGET FEND OFF DOWNGRADE WOES?
Economist are sceptical that the Finance Minister’s speech will do enough to ditch rating downgrades.
Thirteen cents out of every rand of collected revenue goes towards servicing national debt. This will potentially grow should the country receive a ratings downgrade this year.
In December 2016, Standard & Poors’s (S&P) Global put South Africa at BBB-minus with a negative outlook, which is one level above sub-investment grade, while Moody’s and Fitch announced they will be keeping their ratings unchanged.
But Fitch adjusted its outlook to negative.
S&P Global rates the country one notch above junk status and it’s hoped that the country can avoid a downgrade.
The minister says the discussion around value-added taxes (VAT) is ongoing to alleviate this.
“We are certainly not dismissing VAT but you can’t just overnight impose something new – which all studies I am aware of indicate that VAT is a very regressive tax.”
Gordhan says he hopes Wednesday’s speech gets the conversation going about how VAT can be used to grow the coffers.
WATCH: The 2017 Budget in 60 seconds
WHAT ELSE YOU NEED TO KNOW ABOUT 2017 BUDGET
The Department of Basic Education and Department of Higher Education have been allocated R320.5 billion. National Student Financial Aid Scheme will receive R15.3 billion this year.
The Department of Health has been allocated R187.5 billion.- People who earn between R708,000 and R1.5 million will be taxed 41%.
Wine will go up by 30 cents a litre, while the tax on spirits will increase by about R4.50 a bottle.
Excise duties on a packet of 20 cigarettes will increase to R14.30 from R13. 24.
The tax on a 340 mil can of beer will increase by about 12 cents a can.
Motorists will cough up 30 cents more per litre for petrol.
The Road Accident Fund levy rises by 9 cents.
Sugar-sweetened beverages will be taxed 2.1 cents per gram (only when the sugar content exceeds 4 grams per 100ml of a beverage).
The increase in social grants will come into effect on 1 April 2017 with a R180 billion stake from the overall national budget.
Old age grants for over 60-year-olds will increase by R90 to R1,600 per month.
Old age grants for over 75-year-olds will also increase by R90 to R1,620 per month.
The disability and care dependency grant will R90 to also be R1,600 per month.
Foster care grants go up by R30 to R920 per month, while child support grants increase by R20 to R380 per month.
WATCH: #Budget2017 - How it will affect you