South African Budget Statement Details Income Tax Cuts

by Amanda Banks, Tax-News.com, London

31 October 2001

South African Finance Minister, Trevor Manuel, has delivered his Medium Term Budget Policy Statement this week before Parliament to give an idea of what lays ahead in the 2002 February Budget.

In his speech Mr Manuel said there will be more income tax relief for taxpayers in the lower and middle income brackets and provisions will be made 'with a view to narrowing the gap' between the top marginal income tax rate and the company tax rate.

'The government's commitment to tax relief will lead to more spending which is important for economic growth in the year ahead,' said the Finance Minister at a press conference yesterday.

And in his speech he pledged that further amendments will be made to enable more organisations perfoming 'public benefit activities' to obtain tax exempt status and a thorough review of the tax treatment of retirement saving will also be undertaken.

Mr Manuel added: 'The broad parameters of the tax law are now in place, and taxpayers can arrange their affairs with confidence in both the structure of the tax code and the steadily improving capacity of the revenue authority to ensure its impartial and effective administration.'

Based on a preliminary classfication of 2000/01 receipts, the Minister stated that the main deviations from the Budget estimates are:

• Individual income tax is R1.1-billion lower
• Company taxes were R3.1-billion higher
• The tax on retirement funds was R1-billion lower
• Value added tax was R402-million higher
• Levies on fuel were R405-million lower

A preliminary outcome of revenue in the 2000/01 financial year amounted to R215.9 billion including:

• R85-billion from individuals
• R29-billion from companies
• R4-billion from the secondary tax on companies
• R79-billion from domestic taxes on goods and services - the bulk of this (R54 billion) from VAT

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