In the recent 2024 Budget Speech of South Africa, Finance Minister Enoch Godongwana outlined the new (or not so new) tax brackets for personal income taxpayers. The budget proposes tax increases totalling R15 billion for the 2024/25 fiscal year to alleviate “immediate pressures” on the budget. However, a closer look reveals a hidden tax increase that may have slipped under the radar for many South Africans.
South African politician in their natural habitat
No Inflation Adjustments: A Stealthy Tax Increase
One of the key points in the budget speech was the absence of inflation adjustments to the personal income tax tables. This means that medical tax rebates will also remain the same as 2023. With tax brackets not being adjusted for inflation, South Africans who received a salary increase this year will end up paying more tax, or even being pushed into a higher tax bracket.
This is effectively a tax increase, directly linked to inflation. South Africa's annual inflation rate for goods was 6.6% in January 2024, up from 6.4% in December 2023. This means that while salaries may have increased to keep up with inflation, the lack of adjustment in the tax brackets means that a larger portion of individuals' income will be taxed.
A Signal for Future Tax Increases?
The lack of inflation adjustments in the tax brackets might also be a signal that future taxes will be increased. The proposed budget tax measures are intended to generate R15 billion to alleviate the immediate fiscal pressure. That revenue will be raised primarily through personal income tax by not adjusting the tax brackets, rebates and medical tax credit for inflation.
While the budget speech did not announce any drastic new tax measures, the lack of inflation adjustments to the tax brackets effectively results in a tax increase for many South Africans. As we navigate these challenging economic times, it's crucial to understand the implications of these fiscal policies on our personal finances.
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