In the 2017 Budget, the shortfall has been revised to R 30.4 billion, updated rom the predicted R 22.8 billion announced in the Mid Term Budget Policy Statement. This is the largest tax revenue shortfall relative to budgeted estimates since 2009/10.
In order to finance existing government expenditure, the Minister of Finance proposes to raise tax rates, primarily for high income earners.
Vat collections fell R 11.3 billion short of estimates. However, the VAT rate will not increase.
Government will look to expand the VAT base by removing the zero-rating on fuel, and by updating the VAT regulations for electronic services supplied by foreign businesses to include cloud computing and services provided using online applications.
Withholding tax on immovable property sales
Government proposes to increase the withholding tax on immovable property sales by non-residents. Rates will be increased from 5% to 7.5% for individuals, 7.5% to 10% for companies and 10% to 15% for trusts.
An additional R 5 billion has been allocated over the next 3 years, over and above the R 32 billion that was previously allocated.
Personal Income Tax
Personal income tax collections fell R 15.2 billion below estimates. A new top personal income tax bracket of 45% for taxable income above R 1.5 million per year has been proposed.
The new top marginal income tax bracket combined less than full relief for inflationary effects across all income levels is expected to contribute R 16.5 billion towards the target of R 28 billion.
Dividend Withholding Tax
The rate of dividend withholding tax will increase from 15% to 20%, with effect from 22 February 2017.
Inbound foreign dividends will also be taxed at the rate of 20%, subject to the applicable exemptions and adjustments, from 1 March 2017.
This proposal is expected to contribute R 6.8 billion towards the target of R 28 billion.
Government proposes to raise the duty-free threshold on purchases of residential property from R 750 000 to R 900 000, effective 1 March 2017.
R 3.2 billion will be generated by 30c per litre and Road Accident Fund levy increases by 9c a litre, effective 5 April 2017.
Since 2014, tax on petrol has risen from 27% to 36% of the pump price; and for diesel from 28% to 45%.
Capital Gains Tax
Structures have been identified involving a company buying back shares from its current shareholders to avoid the tax consequences of share disposals by the shareholders.
It has been proposed that specific countermeasures be introduced to curb the use of share buyback schemes.
The effective date has been announced.
Tax on sugar-sweetened beverages from 2017, once legislation passed.
A revised Carbon Tax Bill will be published for public consultation and tabling in Parliament by mid-2017.
Excise duties on alcoholic beverages increase by between 8% and 9.5%.