With everyone still reeling from the much-awaited inauguration of our new president Cyril Matamela Ramaphosa and straight into the dreaded budget speech. It is safe to say we all need to sit back and take a minute to digest what this all means for you and me. How does the budget speech affect our business, our employees, our customers and our suppliers? OK, I am not going to bombard you with a whole lot so let’s just look at a few points that may interest you.
VALUE ADDED TAX (V.A.T.) has increased from 14% to 15%. So everyone wants to know how does it affect me and when will it be implemented.
The VAT increase will arguably have a bigger impact on the lower to the middle consumer. General inflation will increase and the average consumer’s pockets will be hit the hardest.
Business will commence the implementation of the VAT increase of 14% to 15% from the 01 April 2018.
This will mean that an upgrade of your business accounting software and a meeting to update all relevant business parties is recommended.
Employment Tax Incentive
ATB Consultants (Pty) Ltd has always been a major supporter of the Employment Tax Incentive (ETI). As it is just one step forward in addressing South Africa’s youth unemployment crisis, and the decision to extend the programme until the end of the 2019 tax year is favourably welcomed.
Tax increases in a nutshell
Most South African business and personal taxpayers are expecting tax hikes across the board from listening to the finance minister’s Budget Speech on 21 February 2018.
The gross tax revenue projected for 2018-19 amounts to R1.345-trillion.
An increase of 52c a litre for fuel is proposed. This will consist of 22c a litre more in the general fuel levy and 30c a litre more in the Road Accident Fund levy.
A R700m adjustment has been made to the medical tax credit.
Estate duty will be raised from 20% to 25% for estates above R30m, whereas previously it was a flat 20% for all estates.
Ad valorem excise duty rates of 5% and 7% will be increased to 7% and 9%, with the maximum duty for motor vehicles being increased from 25% to 30%.
Excise duties on tobacco products will rise by 8.5% and on alcohol by between 6% and 10%.
The plastic bag levy, the motor vehicle emissions tax and the levy on incandescent light bulbs will also be raised.
Partial relief for fiscal drag will cost the fiscus R7.3bn. The health promotion levy (sugar tax) is expected to generate R1.93bn in 2018-19.
The ratio of gross tax revenue to GDP will increase from 25.9% in 2017-18 to 27.2% in 2020-21.
The Carbon Tax Bill will be implemented from January 1 2019.
Travel reimbursements and allowances
Travel reimbursements is a painful point for many employers and employees.
Up to 28 February 2018, a portion of an employee’s travel costs was treated as remuneration when:
- The per-kilometre rate used to calculate the travel reimbursement was greater than the SARS-prescribed rate per kilometre.
- An employee is reimbursed for more than 12,000 business kilometres are reimbursed during the tax year.
- The reimbursement value was greater than the prescribed maximum number of business km (12 000 km for 2018) multiplied by the prescribed rate per kilometre (R3,55 for 2018).
SARS has announced a simplification of the travel allowance and the travel reimbursement provisions, with effect from 1 March 2018.
Business Funding and Development
A fund with an allocation of R2.1 billion over the medium term is being developed between the Departments of Small Businesses, Science and Technology and the National Treasury to benefit small and medium enterprises during the early start-up phase. By enabling new businesses with new ideas to emerge and thrive, we can transform patterns of production in the economy.
FYI: As we approach the New Financial Year 2019 from 01 March 2018 to February 2019, let us take this opportunity to figure out how we can positively contribute to the economy of South Africa. The place we call Home.
ATB Consultants (Pty) Ltd would like to wish all Businesses a Prosperous New Financial Year 2019.
Tags: budget speech