While delivering the annual budget speech, Finance Minister Tito Mboweni announced that there will be an increase in the personal income tax brackets and rebates.
In an effort to ease the burden of inflation on individual households, the personal income tax brackets and rebates will increase by 5%.
The National Treasury said this adjustment will lower tax revenue by R2.2 billion.
This follows the R500 billion social relief package that was introduced after many South Africans lost their jobs because of the impact of the Covid-19 lockdown.
“Most of the relief benefits lower and middle-income households. If the tax tables were not adjusted this would have raised R11.2 billion.
“An inflationary adjustment will apply to the value of medical tax credits, which will increase from R319 to R332 for the first two members, and from R215 to R224 for all subsequent members,” the department said ahead of the tabling of the 2021 Budget.
The Minister also announced that the minimum value for paid-up retirement annuities has not been adjusted since 2007/08.
The value of this will increase from R7 000 to R15 000 from 1 March 2021.
“To support the economic recovery, government will not raise any additional tax revenue in this Budget.
“Substantial tax increases in previous years have raised less revenue than anticipated due to their impact on taxpayer behaviour and growth.
“Tax increases initially proposed in the June 2020 special adjustments budget are withdrawn. Given the better-than-expected revenue performance in the second half of 2020/21, there is no longer a need to implement these measures and their withdrawal will not widen the budget deficit.”
This expected revenue loss is expected to be recovered by increasing excise duties on tobacco and alcohol.
“Excise duties have been increasing above inflation in most recent years, resulting in a higher tax incidence. Government will increase excise duties on alcohol by 8% for 2021/22.” said Mboweni.