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The budget: What it means for the automotive aftermarket

Personal and corporate tax relief may not be enough to cancel out the effects of increased sin tax and its impact on disposable income.

Tito Mboweni’s budget has been welcomed as considerably less harsh than expected. In fact, it contains several pieces of good news. According to Pieter Niemand, MIWA National Director, the personal tax relief provided by the budget is particularly noteworthy, especially given the financial pressure that most South Africans face. Pieter is also pleased that citizens will not be expected to foot the bill for the vaccination programme. The 1% reduction in corporate tax is further reason to feel positive, as is the fact that VAT has remained unchanged – but, says Pieter, consumers will face other challenges in the form of increased fuel levies, carbon tax, and sin taxes, which are certain to affect their disposable income.

Here are some of the ways the budget will affect you:

  • No increases to personal or corporate tax.
  • Personal income tax brackets have been raised to provide relief to middle and lower-income earners. So, people who earn R87 300 per year will now find themselves in the tax-free bracket, which gives them R756 extra.
  • The reduction in corporate tax, from 28% to 27%, may help to bring down unemployment.
  • ‘Sin tax’ – applied to beer, whiskey, and wine but excluding sorghum beer – is set to increase by 8%. In practical terms, this means that a pack of 20 cigarettes will cost R1,39 more, and a bottle of 750ml will be R5,50 more expensive.
  • The fuel levy will increase by 27c per litre for fuel and diesel, placing pressure on consumers due to the added transport costs and increased prices across a range of goods and services.
  • Government’s consolidation of the fiscal position will be aided by the move to cut public wages by R303 billion over four years.
  • The social grants budget is set to be cut by 2.2% over the next three years. However, the number of beneficiaries is expected to increase to 300 000 over this period. Monthly social grant payments have been adjusted as follows: 
    • A R30 increase for the old age, disability and care dependency grants to R1 890. 
    • A R30 increase in the war veterans grants to R1 910. 
    • A R10 increase in the child support grant to R460. 
    • A R10 increase for the foster care grant to R1 050. 
  • R7 912 billion has been allocated for the repair and replacement of ageing infrastructure.
  • R83.2 billion has been set aside to fund employment programmes, along with R11 billion for the Presidential Youth Employment Initiative. It is hoped that this R94.2 billion will help to address the country’s unemployment crisis.
  • Employment and job creation may receive a further boost with the Department of Small Business allocating R4 billion to township and rural enterprises.