There were no nasty surprises in the budget speech Finance Minister Nhlanhla Nene delivered to Parliament on Wednesday afternoon, but there were some harsh truths. THERESA MALLINSON outlines the tax hikes none of us wanted to hear about.
1. Forking out too much for fuel levies
A collective moan went out across the nation when Nene announced a 30c increase in the fuel levy, which now rises to R2.55. This is a hard one to swallow because the levy is not used to cover expenses related to road use. Instead, it is used by treasury to fund any aspect of government spending.
The Road Accident Fund levy, which is at least used to compensate road-accident victims, will also rise by 50c, up to R1.54.
This means that from April, consumers will pay R4.09 in levies for each litre of petrol bought. That’s right, more than a third of the money you handing over at the pump will go – directly or indirectly – into state coffers.
The trickle-down effect from the increase in fuel prices means that these levies will be felt by motorists, users of public transport and, as food transport costs are passed on to consumers, anyone buying food.
2. Not forking out enough for social grants
According to Nene, as of December 2014, 16.4 million South Africans benefit from social assistance, which includes old-age pensions and child-support grants.
Old-age, war-veterans, disability and care-dependency grants will increase by R60 to R1,410 a month. Foster-care grants will increase by R30, to 860 a month. And child-support grants increase by a paltry R10, to R330 a month.
It’s concerning that the child-support grant is not keeping pace with inflation – it has only risen 4.8% from 2014’s average monthly grant of R315. Meanwhile, CPI inflation for 2014 was 6.1%, but for the lowest bracket of consumers it was more than 7%. This means that in real terms, the child-support grant has actually decreased.
If these figures don’t mean much to you, take a deep breath and try to imagine raising a child on just over R10 a day – that’s only half of the official measure for the poverty line ($2 a day).
Nene explained that tax rebates for pension and medical aid – which rise in line with inflation – will actually mean tax relief for people earning less than R450,000 a year; so effectively, only people earning more than this will be paying more tax. For example, if you earn R1.5 million a year, your tax burden will increase by R1,105 a month.
If you’re at the lower end of the income scale, it’s worth remembering that the tax threshold – below which you do not have to pay tax – rises from R70,000 to R73,650 for the 2015/16 fiscal year.
And, if you’re super-rich, you can breathe a sigh of relief – there was no mention made of the much-debated wealth tax.
4. Education: putting out fires
A couple of things caught our eyes in in terms of the education budget. Firstly, Nene stated that the National Student Financial Aid Scheme (NSFAS) is projected to spend R11.9 billion in 2017/18 (up from R9.2 billion in 2014/15). With student-aid-related protests at several universities in January and February, having more money to fund students in need can only be a good thing. But higher education minister Blade Nzimande recently ordered an investigation into the scheme, owing to allegations of fraud and corruption. So, the first priority has to be for NSFAS to properly administer the money it already has.
Secondly, Nene mentioned that: “All books delivered to schools from January 2016 will be managed through a centrally negotiated contract.” Clearly the government is attempting to stamp out the Limpopo textbook scandal, but we’ll have to wait until next year to see if a centralised approach bears fruit.
5. Eskom and the price of keeping the lights on
Nene proposed that the electricity levy be increased from 3.5c/kWh to 5.5c/kWh, to “assist in demand management’’. (He didn’t explain how an increase in the levy would help with demand management but presumably the Department of Energy will soon enlighten us.)
But the levy itself is small change compared with any electricity price adjustment that Eskom might apply for later this year. When Eskom applied for a 16% increase in the electricity price in 2012, it was granted only an 8% increase. But if the energy regulator favours a more “cost-reflective tariff” this time round, it could mean a significant jump in the cost of electricity.
So, is there any good news among all the fiscal belt-tightening for government and consumers alike? At least VAT, for now, remains at 14%.
Correction: This article originally stated the child-support grant was rising “pretty much in line with inflation”. In fact, the grant is not keeping pace with inflation. The paragraph has been updated to reflect this.