AS ALL eyes turn to the Mzansi minister of finance and tomorrow’s budget speech, we turn the spotlight to tax issues.
Cyril Ramaphosa has been sworn in as the new Mzansi president and many people and businesses wonder if they will be asked to fork out more in tax.
With government already facing a big R50 billion budget deficit, there is a desperate need to plug the upcoming shortfall as well as find funds for free tertiary education for the needy.
Rob Cooper, tax expert at Sage and chairman of the Payroll Authors Group of South Africa, told SunMoney that while some spending cuts would help fill the gap, we should expect a 1% or 2% increase in VAT, steep hikes to fuel levies and sin taxes, higher capital gains taxes and personal income tax hikes for high income earners.
“Personal taxpayers, with the exception of low income earners, should probably not expect the finance minister to adjust personal income tax brackets and rebates to deflect the effects of inflation.”
Cooper gave us a list of three things to look out for in this year’s budget, each of which will have a major effect for employees and employers alike:
National Health Insurance
One of the big will-he-or-won’t-he questions the finance minister faces this year is whether to do away with the modest tax credit taxpayers receive for their medical aid payments. Government is eyeing an estimated R25 billion in funds from scrapping these tax credits, to be used to fund the incoming National Health Insurance scheme.
Travel reimbursements and allowances
Travel reimbursements have long been a pain point for many employers and employees.
Up until 28 February, a portion of an employee’s travel costs was treated as remuneration.
The allowance for remuneration was broken down into three categories:
- If the every-kilometre-travelled rate used to calculate the travel reimbursement was greater than the SARS prescribed rate for every kilometre.
- If an employee is reimbursed for more than 12 000 business kilometres during the tax year.
- If the reimbursement value was greater than the prescribed maximum number of business kilometres – 12 000km for 2018 – multiplied by the prescribed rate for every kilometre, which is R3,55 for 2018.
The result was that skills development levies and Unemployment Insurance Fund contributions were added to something that should be considered as an operational cost rather than a payroll cost. This in turn increased the employer’s cost of employment.
Employment tax incentive
Cooper said: “I’m a fan of the employment tax incentive as an innovation geared towards addressing South Africa’s youth unemployment crisis.
“The decision to extend the programme until the end of the 2019 tax year is welcomed. However, administration of the scheme has always been a complex headache for SARS and employers alike, a factor that has made some companies hesitate to take advantage of it.
“Though SARS and the National Treasury have adjusted the employment tax incentive over the years, I – and many others, including SARS employees – would welcome simplified definitions and calculations.”
