Prof Matthew Lester's review on the Budget Speech

The RSA national Budget Speech 2012/13

Video Link:  http://youtu.be/n2HS-rs46G0

South Africa”s National Budget Speech 2012/13 Part 1

Summary of Video

A graphic analysis of Finance Minister, Pravin Gordhans National Budget Speech 2012/13,Professor Matthew Lester, Rhodes Business School, Grahamstown, SARS, SAICA, Lester, Tax , South Africa,. “Rhodes University”

Video Link: http://youtu.be/oBH_nClzRW4

South Africa”s National Budget Speech 2012/13 Part 2

Summary of Video

A graphic analysis of Finance Minister, Pravin Gordhans National Budget Speech 2012/13,Professor Matthew Lester, Rhodes Business School, Grahamstown, SARS, SAICA, Lester, Tax , South Africa,. “Rhodes University”

 

Article

One had to wonder where finance minister, Pravin Gordhan, was going to find the taxes in the 2012/13 National Budget.

The answer is simple. This year it is the companies’ turn to take some burden. After all, company tax collections have declined to only 21% of the total tax burden. While the individual taxpayer has had to assume 36% of the burden by way of personal income tax alone and a further 28% by way of VAT.

SARS stood to loose as much as R8 billion a year when Secondary Tax on Companies (‘STC’) is  replaced by dividend tax on 1 April 2012. That was not sustainable.

So dividend tax will be implemented at the higher rate of 15%. That will compensate for the loss in revenue inherent to the dividend tax system when exemption from the tax is given to companies and retirement funds.

But it must have caught equity markets offside.

But that’s not all.

The long awaited increases in the Capital Gains Tax rates has arrived, effective in the 2013 tax year. Companies have had their inclusion rate increased to 66,7% (formerly 50%) and Individual taxpayers to 33,3% (formerly 25%).

The coupling of CGT and dividend tax in We have detailed FAQs that will answer your questions about each of the free casino games while also providing insight into some of the jargon and etiquette associated with each game. company distributions is going to increase the effective tax rate on a distributed company capital gain to 32% (formerly 22%).

That might just encourage companies to retain capital gains and reinvest.

The bright side to the story is that dividend tax will finally be implemented. There is much to be said for that!

Yes, the individual taxpayer will benefit from adjustment to the personal tax tables to take account of inflation.

But the change in the medical aid tax deduction to a rebate system, coupled with the taxation of Group Life and Permanent Health Insurance fringe benefits, coupled with the CGT inclusion rate increase, makes this a tough year for the individual taxpayer.

Individual taxpayers will pay R32 billion more in income tax alone during 2012/13.

Consumers were spared the massive increases in VAT and fuel levies that could have been justifies in the budget. 28cents a liter is a generous gesture from the Minister in these time of oil prices over $110 a barrel.

Beer drinkers will now pay R1,01 per can in sintax only. About a 10% increase. But that’s nothing on spirits. Sin tax up by R7 to R36 a bottle. That’s 20%. A sad day for whisky drinkers.

But spare a thought for the 15 million South Africans reliant on grants. The old age grant was increased by R60 per month to R1200 per month. Or R1220 per month for those over 75 years old.

And the child grant has been increased by R15 per month to R280. One must wonder how they make it!

Last years tax collections were only R4 billion below target of R742 billion. That’s a great achievement. The deficit is contained around 4% of GDP.

And we all survive to fight another day in hard times.

Yes today South Africa is far better off than Greece or Italy.

 

Well done. Pravin Gordhan!


Showing 2 Comments »

  1. Excellent review Prof – well done

    Comment by K Rafferty — 22 February 2012 @ 3:57 pm

  2. Hi Matthew, referring to your presentation in Durbs yesterdy, please don’t forget to include the use of endowments in a clients financial structure in your comparison of the different investment vehicles. I would like to see the results as I think there are good merits for using an endowment wrapper if the CGT rate remains at 7.5%. Ps I always enjoy your presentations – very nice humour! Cheers Kevin

    Comment by Kevinf — 29 February 2012 @ 8:15 am

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