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Budget Speech 2018

Malusi Gigaba was introduced to the budget speech 2018 by the DA calling him a liar under oath and called a motion, that he be disallowed from continuing with the speech. Madam Speaker swiftly swept the request aside, with confused statements and requested that Gigaba continue.
Gigaba hardly paused for a breath during his speech, to prevent interruptions. With the odd sip of water and random comment of “cheers”. He highlighted the challenge of our time, equal access for all and continued with words of optimism and resolve. Certainly, we need hope, as the country’s finances are in a precarious state.
The latter part of the year has seen some positive change in the South African economy. A stronger Rand and improving business confidence is returning to our resilient economy. There are signs that growth has begun again. Expectations are that the countries growth will be 1% in 2018, 1.5% in 2019 and 2,1% by 2020. Not great expectations but at least the outcome is positive.
Gigaba highlighted “Together, government, labour, the private sector and civil society have the ability and responsibility to grow the economy inclusively.”  He focused on the need to create the right environment for business, policy certainty for investment while recognising that agriculture, mining and business – largely export – are key factors that can help our economy grow. This was followed by emphasis on the “high potential of SME’s” to create jobs in our economy and reduce the unemployment rate.
There are positive estimates that the budget deficit will decrease from 4.3% to 3.5% over the medium term. Government spending makes up 26.6% of GDP which is far too high in an emerging economy. One would hope that government spending is the focus area to reduce the deficit. We also remember the call of university students, for government to reduce wasted government expenditure of R32 billion to pay for free education, improving efficiencies and further reducing the deficit.
Net debt is currently showing improved data at 53.2% and is expected to grow to 55.3% rather than the previous projections of over 60%. Debt remains high, given that growth of the South African economy remains low.
The tax collection shortfall, free education and other ailing parts of the economy are to be subsidised mainly by:
•    An increase in the VAT rate from 14% to 15%, from the 01 April 2018;
•    An increase in the personal taxes, by leaving the upper brackets unchanged. Allowing for substantial bracket creep. The lower brackets received some relief.
The company tax remained unchanged at 28%.
The lower threshold of Small Business Corporation (SBC) tax rate changed slightly. The other brackets remained unchanged. This was surprising, considering the emphasis on the substantial part that small business must play in the growth of our economy. With the increase in dividends tax to 20% last year, increased personal tax and the static tax brackets, capital growth is again restricted in the SBC sector. This tightening of cash availability limits the ability of small business to grow capital assets and employ more staff. Cash is tied up in taxes and is further restricting the growth of the economy. This results in shrinking profitability and limits further growth of the sector.
Greater profits and stability in SBC’s will result in higher tax collection. There is so much potential in small business, to alleviate unemployment and stimulate the economy. Growth and job creation in small business would reduce the pressure on the social grants sector and free up further income for free education. Increased education would stimulate entrepreneurs to start up small business thereby increasing the job market with solid workplace skills. This real growth would put food on the table and increase real equality in our society.  
On the back of a drought; a slow economy due to lack of development; many company annual losses; and liquidations; one would expect lower tax collection. In 2017/2018, government was aware of the looming tax revenue shortfall. Insufficient action was taken during the year to mitigate the concern and avoid the tax losses, with planned spending to stimulate growth and to provide relief in agriculture.
South Africa needs to stop thinking about how to collect sufficient taxes and start focusing on how we can grow our economy. The South African Revenue Services (SARS) is one of the most efficient tax revenue collection agents in the world. The problem is not in the tax rate or the ability of SARS to collect the debt. The problem is our inability to strategically set our economy up for growth, expanding and stimulating the right factors to allow growth in all industries, resulting in profits that increase employment and put food on the table (equality).
President Ramaphosa, who understands business and is degreed, has the unique opportunity to take this budget and stimulate confidence that generates growth in the South African economy. An opportunity that is focused on Business and Job Creation, not Capitalism.
 

Tax tables 2018/2019

Taxable Income Rate of Tax
0 – 195 850 18% of taxable income
195,851 – 305,850 35,253 + 26% of taxable income above 195,850
305,851 – 423,300 63,853 + 31% of taxable income above 305,850
423,301 – 555,600 100,263 + 36% of taxable income above 423,300
555,601 – 708,310 147,891 + 39% of taxable income above 555,600
708,311 – 1,500,000 207,448 + 41% of taxable income above 708,310
1,500,001 and above 532,041 +45% of taxable income above 1,500,000

Rebates

Primary R14,067
Secondary (Persons 65 and older) R7 713
Tertiary (Persons 75 and older) R2 574
Age  Tax Threshold
Below age 65 R78 150
Age 65 to below 75 R121 000
Age 75 and over R135 300

Medical tax credits increase from R303 to 310 and 204 to 209.
No changes in the interest exemption. Relief will need to be sought in tax free investments.
Capital gains tax remains unchanged.
Reimbursement travel increase to R3.61 per km.
Donations Tax and Estate duty both increase to 25% for amounts over R30 million.

Income Tax Small Business Corporations

Taxable Income Rate of Tax
0 – 78 150 0% of taxable income
78 151 – 365 000 7% of taxable income above 78 150
365 001 – 550 000 20 080 + 21% of taxable income above 365 000
550 001 and above 58 930 + 28% of taxable income above 550 000

Companies Tax Rate 28%.
Trust Tax Rate 45%.