On the new personal income tax bracket for top earners
“I am not surprised by the rise in the top marginal income tax rate to 45%, given the R28 billion revenue gap Minister Gordhan needed to plug. As a form of wealth tax, it’s more politically acceptable than a VAT increase; like the National Minimum Wage, it also has a redistributive effect that could help reduce inequality.
“That said, given that high-income earners in South Africa already carry a heavy tax burden, government should perhaps be cautious about adding too much more to it in the next Budget Speech. There is a balance to be struck between collecting a fair share from the wealthy and taxing them so heavily that tax avoidance or moving overseas become attractive options to them.”
Related: 7 Top Tax Tips For SMEs
On the increase in dividends tax
“The increase in withholding tax on dividends from 15% to 20% is significant since it will raise a further R6.8 billion for the fiscus. While it’s a relatively equitable tax increase in an environment with little room for manoeuvre, it could affect pensioners who depend on income from dividends as well as discourage savers. Also noteworthy is a change to the law that includes three categories of dividends in remuneration from 1 March 2017. This means that these dividends can be potentially taxed at 45% – it was 41% before. “