Budget 2017, a mixed bag of more for some and less for others
Category Newsletter: Article
By the time Budget 2017 arrived, it was fairly well known that Treasury needed to find an extra R28bn to meet its obligations this year and, with the poor economic outlook, it was almost certain that higher taxes would be introduced. It was just a matter of what, and how much.
While a hike in the so-called ‘sin’ taxes was a foregone conclusion, there was a sigh of relief when Finance Minister, Pravin Gordhan announced that there would be no hike in the VAT rate which currently stands at 14%.
There was a sigh of relief also that no further hike in transfer duty for the higher price brackets was introduced.
On the positive side, the decision to raise the threshold for transfer duty exemption from R750 000 to R900 000 with effect from the 1st March, was a most welcome move for the property market. It will certainly be of benefit to first time property buyers especially.
On the down side, consumers will have to pay more for transport given the 30c/litre hike in the general fuel levy.
While the lower to middle income earners received some relief in personal income tax, a major development is the introduction of a new top personal income tax rate of 45% for annual earnings of R1.5 million and above.
Corporate tax remained unchanged at 28%, but dividends’ tax was hiked quite significantly from 15% to 20%, effective from the 1st of March.
On the positive side and in support of economic growth, this year’s budget will boost spending on road and rail transport, infrastructure, small businesses development, tourism, social housing and wider access to broadband internet.
While this is to be commended, most economists and property industry leaders have raised concerns around the rising burden on wealthy citizens who are often the very people who create wealth in the economy.
Either way, and despite some relief, consumers are having to carry the costs of poor economic growth and rising taxes and costs.
For the property market, rising property taxes and basic service delivery costs will all impact on home owners and the ability to buy or rent property. This will have an inevitable impact on overall demand and liquidity in terms of keeping the market moving and on whether prices can rise adequately to stimulate sales.
Although this is largely a year of adjustment in many respects, economists and the Finance Minister in his budget speech signalled an optimistic outlook that the economy should take a turn for the better this year.
Author: Brian French, Chief Executive Officer
