South African Budget 2015 – May Drive you to Drink…

The South African Budget Speech today has predictably given rise to several humorous headings and tweets, with the alcohol and cigarette price hikes fuelling the best, particularly an acerbic quip from ‘Outside Journalist’ – @andiMakinana – observing that “the government drives you to drink, and then heavily taxes the drinks.” (See more from Twitter below.)

The 2015 national budget announced by Finance Minister Nhlanhla Nene today essentially signalled difficult times ahead with raised taxes and reduced spending plans as the country attempts to come to grips with debt, unemployment and power outages.

There was some good news though with tax breaks announced for working and middle-class income earners. While the “super-rich” will pay more on property transfer pricing (and an extra 48 cents for a bottle of sparkling wine), transfer duty will be eliminated for those purchasing property worth less than R750 000.

Social Development Minister Bathabile Dlamini welcomed Minister Nene’s budget as “pro-poor” as the government “tries to ensure that the lives of people are improved”.

Cees Bruggemans, Consulting Economist at Bruggemans & Associates, summarised the SA Budget as follows (republished here with his kind permission):

South African Budget 2015
by Cees Bruggemans

As BusinessDayLive flashed across television screens before Finance Minister Nene even started speaking, income tax rates +1%, fuel levy +30.5c/l and RAF levy +50c/l. That made the entire hour plus of budget reading rather boring.

Whatever happened to lockups? The killing suspense?

Anyway, let’s not complain. It could have been so much worse.

The Minister stuck with a 2% growth target, suggesting a lack of answers as to how to address this, it in any case not being his problem. He merely had to balance the books and try to keep the worst offenders in line.

He lowered his spending ceiling by R27bn (already done last October). Then he still needed R17bn to get his budget norms to appease the rating people.

He made tax proposals (excluding the RAF levy increase of R10bn not heard of again) of R16.8bn, but then still granted 4% fiscal drag relief, so only netting just over R8bn.

A mystery how he closed the gap with his R17bn needed, except there was a part of a sentence saying more intricate tax changes could be found in appendix C.

I think that is where tax accountant bonuses are locked up – and where Judge Davis went for the corporate profit shifting – except I can’t find it back in the numbers.

What does it mean to you?

If earning over R180,000 your real tax bill next year has just been increased by 1% on the excess. Besides that, he hits you for 80c/l, though see that in context.

How many litres does the family drive annually? Say 4000l?

During the last six months your average travelling bill has gone down by R4/l. Along with a probable 90c/l plus petrol/diesel price increase next week, it means we have so far lost 40% plus of our oil windfall.

That means roughly that consumer and business users of petrol/diesel are still good for a net R50bn windfall annually that they can spend on other things.

So in the end, the Minister went for the fuel levies (by far) and income tax. A few wealth effects such as transfer duties on houses over R2.25 million (attract 3% more), and booze & tobacco.

But this is minimalistic stuff.

It looks like a heaven sent gift for the tax lawyers. Davis likely went to town with the rules. But that is strictly for the lawyers. Grant them their fun.

By Cees Bruggemans. Consulting Economist, Bruggemans & Associates

Please visit: www.bruggemans.co.za

The #Budget2015 on Twitter…

Petrol, electricity and income tax are going up, while small businesses are getting some reprieve. http://ow.ly/JD2Dr
mailandguardian ‏@mailandguardian

Smokers, drinkers to cough up #Budget2015 http://bit.ly/1vyn4c0 
Times LIVE ‏@TimesLIVE

“@TimesLIVE: #Budget2015 means SA workers in for tough time: Maimane http://bit.ly/1BsOaUF”
Helen Zille ‏@helenzille

SA’s 2015 growth revised lower as electricity woes dent confidence http://ow.ly/JDeaE
BDlive ‏@BDliveSA

Eskom getting R23-billion. (6 billion hamsters, 6 billion exercise wheels, 50000 kms of copper wire to hook them to the grid.)
Tom Eaton ‏@TomEatonSA

The National Treasury says the government will not consider scrapping e-tolls in Gauteng http://www.fin24.com/Budget/Treasury-stays-firm-on-e-tolls-20150225 …
News24 ‏@News24

Nene: Taxpayers, except those in the lowest tax bracket, will see a slight dent in their pay packets from April 1
SA Press Association ‏@SapaNews

The government drives you to drink, and then heavily taxes the drinks. Akunzima!
Outside Journalist ‏@andiMakinana

16.4-million people of 52-million are on social grants. Something is wrong.
Justice Malala ‏@justicemalala