New squeeze on the way?
TJ Strydom
STRUGGLING consumers are likely to get some nasty surprises tomorrow when Finance Minister Pravin Gordhan delivers his budget. "We will probably see the fuel levy go up again by a few cents," Solidarity trade union economic researcher Paul Joubert said.
This was expected despite the petrol price having increased by nearly 14% since Gordhan gave his budget address to parliament in February last year, with the fiscus pocketing about half of what motorists pay at the pump.
And the price is due to go up again next week by more than 30c, according to the Central Energy Fund.
In the past decade, the levy has mostly been pushed up, with only a slight pause in 2008, according to Joubert.
He expects the same will happen with levies on tyres and new vehicles.
Though most economists do not believe Gordhan will raise income taxes directly, the Treasury has a few tricks up its sleeve, most of them likely to affect the middle classes.
Analysts say that is because four out of every five tax rands paid in income tax come from a small pool of only 1.7 million people, who are unlikely to get any breathing space soon.
Though South Africa had nearly 14 million registered income taxpayers last year, the overwhelming majority of the revenue came from the much smaller pool, Solidarity said.
Its research shows that 3.7 million people paid 96% of all income tax. And even in this smaller group, one million people contributed very little – so 2.7 million South Africans actually shoulder 90% of the burden, and 1.7 million 80%.
"It is like being a member at a gym. Just because you're registered, doesn't necessarily mean you will be active," Joubert said.
Old Mutual Investment Group economist Rian le Roux said big tax changes were unlikely as a commission appointed by Gordhan last year to review the tax system was still busy.
But Le Roux said he would not rule tax rises out completely.
Momentum Asset Management economist Sanisha Packirisamy saw the potential for some allowance for bracket creep on tax rates at the middle to lower end of the consumer market.
She said there was the possibility that Gordhan would increase income tax rates for higher-income earners or even increase the value-added tax rate.
"However, we see this as being more of a risk next year, given that this is an election year," Packirisamy said.
The unexpected interest rate hike last month was also putting pressure on middle-class consumers, she said.
Joubert said the middle-class was being squeezed from all sides and could in fact be seen to be double-paying for many services. "That is why we approached the Treasury to allow private security costs to be tax-deductible, but after initial discussions we have not heard anything from them."
On tax for the past year, Joubert said the tax threshold had been increased by only 5.6%, while the thresholds of other tax brackets were increased by 3.5%.
"As those increases were lower than the prevailing inflation rates, these adjustments, in fact, brought about a heavier tax burden and did not constitute tax relief," Joubert said.
Only if one's income remained unchanged would the tax break have amounted to relief.
Meanwhile, most economists expect Reserve Bank governor Gill Marcus to push up interest rates again next month as inflation expectations are still uncomfortably high.
