VAT and TAX Increases in 2018
FIND OUT MORE ABOUT THE VAT AND TAX INCREASES IN 2018
After the whirlwind appointment of Mr. Ramaphosa as South Africa’s new President, a new chapter has begun in this country. The Budget Speech given by Finance Minister Malusi Gigaba was a reflection of that. He acknowledged that it would be a tough budget, given the constraints and pressures. Read on and see how this affects your pocket.
WHEN LAST WAS VAT INCREASED IN SOUTH AFRICA?
This is the first increase in VAT, from 14% to 15%, in the last 25 years, or since 1993.1,2 Minister Gigaba was quick to point out that this is still reasonable compared to some other African countries. Altogether, including the VAT increase, revenue will add up to an additional R36 billion.
GOVERNMENT SPENDING TO BE CURTAILED
Reduction in State expenditure is planned to be R85 billion over the next three years. 1
HONOURING THE PROMISE FOR FREE TERTIARY EDUCATION
Phasing in the reduction in tertiary education fees for some students will require R57 billion over the next three years. Of that amount, R12.4 billion has been allocated to first-year students enrolling for 2018/2019, and who come from families earning below R350 000 per year. 1
SOCIAL GRANTS WERE INCREASED
Social grants were increased by approximately 7%, on average. 1
CONSOLIDATED BUDGET DEFICIT TO BE REDUCED BY 2020/2021
The budget deficit is planned to decrease from 4.3% of GDP in 2017/2018 to 3.5% in 2020/2021. Minister Gigaba concluded that it was a balanced budget, considering the unfavourable circumstances1.
WHAT ARE SOME OF THE MACRO-ECONOMIC ASPECTS?
Some of these aspects are highlighted below: 1
- GDP growth is expected to rise from 0.7% in 2017 to 1% at present. This is expected to increase to 1.5% for 2018, and should reach 2.1%.
- Recovery of the world economy has supported South Africa’s expansion in investment and trade. The good news is that the State is going to implement good governance and sound financial management of State-owned-enterprises or SOEs.
- Consumer inflation is expected to drop from 6.3% in 2016 to 5.3-5.5% over the period 2017-2020.
- A disturbing fact provided was that unemployment had risen to its highest level since 2003.
FUEL LEVY WILL INCREASE IN APRIL 2018
The general fuel levy will rise by 52 cents to R3.62 per litre of petrol on 4 April 2018. Last year, the fuel levy increased by 30 cents. 1,2
ANY ADDITIONAL FUNDING FOR SOEs?
A recent property audit conducted by the Department of Public Works revealed that the State owns up to 195 000 properties valued at over R40 billion. It was proposed to use these properties more efficiently or dispose of them in the future as financial support for SOEs. 1
HOW COULD THIS BUDGET EFFECT INSURANCE PAYMENTS?
Tougher times are ahead for households in general with all the changes and increases, and although insurance is a regular monthly expense, it is typically better if households do not have to compromise on their insurance obligations just because of tighter budgets. Expensive items such as cars and homes still are a high priority for many an insurance cover to protect against unforeseen events can be vital when budgets are even tighter. In the event of a disaster happening, the loss of an uninsured vehicle or home can potentially be financially crippling for households and companies.
PMD is able to offer motorists innovative and cheaper car insurance with their model of specific risk insurance. This might be one way for you to assess your own budget if you finding yourself not able to afford comprehensive car insurance or considering cancelling your insurance due to high premiums. With PMD it is guaranteed that your premium is fixed for the life of the policy, which is unlike the ever-increasing taxes that we face.
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