In tandem with what analysts envision as South Africa’s evolving stance to follow the lead of France and the US by levying the upper class in rates realistically marginal to their earnings, there is expectation that Finance Minister, Pravin Gordhan, will forward a higher levy plan in this year’s budget.
The government will most likely surcharge the big income-earning few in the country 2% more than they currently remit at 40%, meaning that their bottom line income of R617001 may attract a 42-percent margin.
Speculation is also rife that the crème de la crème of society, which bags home salaries of up to R1.5 million per annum have high likelihood of suffering a levy slap amounting to 45 percent.
What analysts know, as a director with Deloitte, Luke Barlow, says, is that the levy for this year will engineer policies that will rein in non-compliance issues, thus ensuring that people on the upper echelon of society do not eschew their national financial duties. However, there is no escaping the trends that the rest of the globe has set so far, of bringing down tax inequality.
Tax Framework SA
South Africa individual earnings’ tax is one of several levy frameworks and targets all people in formal employment who remit their dues to the state via their employers or direct remittance to the government.
The threshold is R63 556, which exempts people of less than sixty-five years of age from taxation, but the baseline income is R160000 per annum, which attracts an 18% deduction while the second highest, the one currently under rebasing, is the R617000 and above par, which attracts a surcharge of 40%.
Persons who earn more than R120000 have to audit their earnings and make this known to the state while those below this income limit stand no obligation to do the same as long as they rely on one boss for a source of livelihood and do not obtain allowances for the ensuing 12 months.
Company taxation is a notch different from the individual earnings’ tax regimen. Firms have to remit 28 percent of the eligible chunk of its returns that attracts levying. This does not, however, apply to all, for Small and Medium Enterprises attract a par of 10 percent for returns beyond R59750 while those with three hundred thousand Rand and above take over from the 28% baseline.
The taxation rebasing in South Africa will be a reflection of the ongoing trend in the rest of the world, where governments have established austerity parameters, seeking to bolster ailing economies by taxing the very wealthy at exorbitant rates.
Traditionally, the middle class of the world has been the guinea pig of tax matters from what analysts believe is the ever-changing nature of their income structure, due to the many income sources they have, compounded by the fact that they form the majority of the taxable population.