Tax cuts for individuals, companies
21 February 2007
Finance Minister Trevor Manuel has again brought out a Budget with gifts for all, with R8.4-billion in tax relief for individuals and a cut in the secondary tax on companies.
Delivering his Budget speech in Cape Town on Wednesday, Manuel said the secondary tax on companies would be replaced with a dividend tax on shares and the rate reduced from 12.5% to 10% from 1 October.
With government pushing for a stronger culture of savings among South Africans, the retirement fund tax is being abolished from 1 March. In line with this, the withholding tax on lump sum pension and provident fund payments has been reduced to zero for people earning below R43 000 a year.
The tax threshold will also be raised to R43 000, while for pensioners this amount is raised to R69 000. Those earning amounts below the threshold are exempt from paying taxes.
In addition, there will also be an upward adjustment across all income tax brackets for individuals.
Cartoonist Zapiro's take on one of Trevor Manuel's previous Budgets - there have now been 11 of them - still applies. (Image: Zapiro)
Both small and large companies also stand to benefit: Manuel has proposed a tax rate of 10% for those earning between R43 001 and R300 000 a year, and 29% for companies earning more than R300 001.
For employment companies and foreign companies earning an income from South Africa, the tax rate is 34%.
Other tax proposals include a wage subsidy and a reform of social security tax, and the elimination of certain excise duties on dish-washing machines, sunglasses and certain cameras and projectors.
At the same time, as expected, the so-called "sin taxes" on tobacco products and alcoholic beverages are to be increased.
Manuel said South Africa's tax revenue has grown at an average 17% a year for the past three years, much faster than the country's rate of economic growth, as a result of new taxpayers entering the mainstream economy, as well as legislative, administrative and technological changes.
At the same time, public spending has risen by over 9.2% a year, and is projected to rise a further 7.7% a year over the next three years, "as government ensures that effective programmes and promising new initiatives are funded in line with government's capacity to implement them".
Source: BuaNews
