National Treasury will raise almost R7 billion from the personal income tax system through lower-than-inflation increases to tax rebates and brackets, effectively collecting taxes by stealth.
However, it has acknowledged that further hikes in personal income tax rates could be counterproductive and has kept rates unchanged.
Against the background of the introduction of a VAT hike of one percentage point to 15% on April 1, many taxpayers’ disposable income will come under pressure.
The bottom three personal income tax brackets (for lower- and middle-income earners) and the primary, secondary and tertiary rebates will be partially adjusted for inflation through a 3.1% increase, while the top four brackets will remain unchanged.
The personal income tax burden has increased from 8.3% of GDP in 2010-11 to 9.8% in 2017- 18.
In an effort to stabilise public finances and enhance the progressive nature of the income tax system, government introduced a super tax bracket of 45% for individuals earning more than R1.5 million per annum in 2017.
This was after personal income tax rates were increased by one percentage point in most cases in 2016.
“Another personal income tax rate increase in 2018 would have greater negative consequences for growth and investment than a VAT increase. Moreover, significant shortfalls from this tax in 2017-18 suggest further increases might not yield the revenue required to stabilise public finances,” Treasury said.