2015 Budget Speech Breakdown

02 March 2015

It was the most anticipated budget address in many years as an increase in tax was imminent, the only question was where it would come from. Predictions ranged from an increase in VAT rates to the introduction of a "super-tax" on the wealthy, but Finance Minister Nhlanhla Nene ultimately opted for a progressive increase in personal taxes and took the gap offered by decreased oil prices to increase the fuel and Road Accident Fund levies. Mr Nene's first national budget is conservative and shows government's intent to tighten its belt. The budget deficit of 3,9% is lower than expected, although the total state debt will rise to 42,5% of Gross Domestic Product (GDP).

Tax Proposals:

• Increase marginal personal income tax rates by 1% (one) point forall taxpayers earning more than R181 900, and adjusting tax brackets and rebates to account for fiscal drag.
• Raise the general fuel levy by 30.5 c/litre. The Road Accident Fund levy will also increase by 50 c/litre, bringing the total fuel levy increases to 80.5 c/litre.
• Take further steps to combat base erosion and profit shifting.
• Provide a more generous turnover-tax regime for small businesses.
• Increase excise duties on alcohol and tobacco products.
• Review the diesel refund scheme.
• Strengthen the energy-efficiency savings initiative.
• Raise the electricity levy.
• Change transfer duty rates and brackets to provide relief for middle income households.

Spending programmes:

Over the next three years, government will spend:

Budget framework:

• A budget deficit of 3.9 per cent of GDP is expected for 2014/15, narrowing to 2.5 per cent in 2017/18.
• Debt stock as a percentage of GDP is expected to stabilise at 43.7 per cent in 2017/18.
• The main budget non-interest expenditure ceiling has been reduced by R25 billion over the next two years.
• Increases in personal income tax rates and the general fuel levy are set to add R16.8 billion to gross tax revenue in 2015/16.
• Any additions to personnel headcount for 2015/16 and 2016/17 will be paid for from existing allocations.
• Real growth in non-interest spending will average 2.1 per cent over the next three years and will be more closely aligned to long-term average real GDP growth from 2017/18.
• Capital remains the fastest-growing item of non-interest spending over the medium term, with compensation and goods and services growing slowest.

The full Budget Speech is available for download here.
The 2015 SARS Tax Pocket Guide is available for download here.

Source: National Treasury, South African Revenue Service and Nolands Newsflash

Yours sincerely
Shane Thom