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South Africa Introduces Tax Amendment Bill

by Lorys Charalambous, Tax-News.com, Cyprus

21 June 2013


South Africa's Finance Minister Pravin Gordhan has introduced into parliament a bill that will give legislative effect to the changes in tax rates and monetary amounts arising out of the 2013 Budget.

Most of the changes have already being implemented but require legislative approval. The more substantive legislative tax amendments will be incorporated into the annual Taxation Laws Amendment Bill to be tabled later this year.

The current bill, for example, provides tax relief totalling ZAR7bn (USD704m) for individual income taxpayers by adjustments to the personal income tax brackets that will partially compensate for fiscal drag – individuals moving into higher income tax brackets due to inflationary adjustments to wages and salaries.

"Although the personal income tax brackets were not fully adjusted for inflation in 2013/14," Gordhan noted, "over the last decade and a half personal income tax brackets were adjusted above the annual rates of inflation (and) provided both fiscal drag and real income relief."

On the other hand, the monetary amounts of the monthly medical tax credits are being increased in line with inflation with effect from March 1, 2013, and income tax relief is being provided for small businesses. The monetary brackets of graduated income tax for small business have been increased and an additional lower 21 percent tax bracket introduced. In addition, the annual turnover threshold to qualify as a small business has been increased from ZARR14m to ZAR20m.

In addition, Gordhan confirmed that the Government intends to proceed with the implementation of tax-preferred savings and investment accounts by April 2005. All returns accrued within these accounts and any withdrawals would be exempt from tax. The accounts will have an initial annual contribution limit of ZARR30,000 and a lifetime limit of ZAR500,000, to be increased regularly in line with inflation.

In the meantime, with effect from March 1, 2013, tax-free interest-income annual thresholds have been increased from ZAR33,000 to ZAR34,500 for individuals aged 65 years and over, and from ZAR22,800 to ZAR23,800 for individuals below 65 years of age. These thresholds will not be adjusted for inflation in future years.

The bill also provides for increases in the monetary amounts of various specific indirect taxes. Tobacco excise duties are increased between 5.8 percent and 10 percent, and excise duties on alcoholic beverages are increased between 5.7 percent and 10 percent.

Finally, Gordhan indicated that, while the South African economy has continued to grow since the 2009 recession, the moderate pace of economic growth adversely affected revenue performance during 2012/13.

"The modest nominal growth tax revenues during 2012/13," he said, "was largely the result of weak economic growth during the second half of 2012, the pedestrian growth in our major exporting countries, especially Europe, labour unrest and lower commodity prices. (However,) tax revenues are expected to improve over the medium-term expenditure framework period in line with expectations of improved economic growth and marginally higher levels of commodity prices."

TAGS: individuals | South Africa | Finance | tax | small business | business | tax thresholds | tax credits | ministry of finance | tax rates | individual income tax | Africa

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