15 February 2017

Get Ready for the 2017 Budget Speech

My Money Matters |

The Budget Speech is around the corner and there’s no better time to make sure that you’re ready when our Minister of Finance, Pravin Gordhan delivers his address before Parliament.

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With an economic downgrade to junk status that’s forever looming, it’s no secret that this year’s budget is going to be tight. But the question is – what can you expect to hear on the 22nd of February? Most importantly, what does this mean for each one of us, and even the companies that we work for?

We spoke to Chris Gilmour, Investment Analyst at Absa Wealth and Investment Management – he shared his top five predictions with us.

  1. VAT will remain unchanged at 14%

The last time VAT was adjusted, was in 1994. According to Gilmour, another adjustment in this day and age would be deemed politically indefensible because of the repercussions this would have – especially on the poor. This means that the amount of VAT you pay when purchasing goods or services, will remain unchanged – though prices will probably still increase due to inflation.

  1. The top marginal tax rate will increase

Tax payers who fall in the top tax bracket – meaning that they earn more than R701 301 annually, currently pay 41% tax. Gilmour predicts that this margin will be increased by as much as 4% in the 2017/2018 financial year. This means that South Africans who earn the most, will have less money to spend on goods and services each month. “But that is the price that one has to pay to soothe ratings agencies and other constituents.”

  1. Social grants will be slightly increased

This includes monthly grants for old age (R1 500), child support (R350) and disability (R 1 500). Gilmour predicts that there will once again, just like last year, be a small increase in these amounts. “We’re talking about the poorest of the poor. People who can barely afford to get by. While last year’s increases were barely in line with inflation, at least it would be some attempt to put food on the table.”

  1. Tax incentives to encourage corporates to invest in new infrastructure developments

This is a win-win situation for everyone involved. A large percentage of the economy is in the hands of South African corporates, so encouraging businesses to spend some of that money on developing and maintaining infrastructure around them. In turn, government will be offering tax breaks. This means that sustainable jobs will be created, that will help grow the economy, and ensure the upkeep and development of our cities. “This has been looked at in the past year or two, and hopefully now is the time that we’ll see it happening.”

  1. Widening the scope for sugar tax

In last year’s Budget Speech, the taxation of sweetened drinks was announced for the first time in South Africa. “There is an opportunity for government to expand that additional taxation to other relevant areas and confectionary.” This means that people are likely to look for other ways to satisfy their thirst, and thus have a dampening effect on the corporations involved. On the other side of the spectrum, it could also encourage South Africans to lead a healthier lifestyle.

Video: Chris Gilmour’s top five #Budget2017 predictions:

Disclaimer: The advice contained on this blog is for general purposes only and does not take into account individual circumstances, objectives or financial needs. Accordingly, readers are advised to seek appropriate advice from licensed professionals prior to making any investment, or taking up a financial product or service.

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