Given that National Treasury now must go back to the drawing board and relook tax tables, there will be relief on the cards for taxpayers who would have been pushed into a higher tax bracket.
Yesterday, Members of Parliament voted by a slim majority of 192 for versus 182 against, political parties to proceed with a fiscal framework that was agreed to between most parties and the ANC – excluding the DA.
This means that the National Budget, first presented more than a month ago, has finally been passed with the proviso that the National Treasury will find alternative solutions to alleviating some of the income tax burden in a country in which consumers are already battling.
South African Revenue Services (SARS) figures indicate that there were 27 million South Africans as of the end of March last year, of which only 7.6m, or 28% of this tax base were expected to submit returns.
South Africans, younger than 65 and earning less than R95 750 are exempt from paying tax. However, without adjusting the tax brackets, millions of law-abiding citizens will find themselves in a higher bracket and having to pay tax, with the average rate as of last year being 21.3%.
For someone who would have just been pushed over the threshold, this would amount to just more than R20 000 over 12 months. More than a million South Africans fall into this category, although exact statistics are hard to determine given that the revenue service details the number of taxpayers in different categories than the tax percentages applied in terms of income.
By the end of March 2025, SARS had collected a record gross amount of R2.303 trillion, representing year-on-year growth of 6.9% against estimated nominal economic growth of 5.4% for the 2024/25 fiscal year. Refunds increased 8.2% year-on-year.
This brings the collected net amount to R1.855 trillion, which is almost R8.8 billion higher than the revised estimate, and R114.0 billion more than last year’s R1.741 trillion, it said on April 1.
Bobby Wessels, Senior Manager of corporate & international tax at AJM, said that adjusting the tax brackets to account for inflation is “expected to have a positive impact on the average South African by easing financial pressure in an already challenging economic climate”.
Wessels said that adjusting income tax brackets in line with inflation is a crucial step in preventing fiscal drag – a phenomenon where taxpayers are pushed into higher tax brackets without a corresponding increase in real income. “Without such adjustments, South Africans would effectively see their purchasing power diminish due to higher tax contributions on their earnings.”
Kabelo Moutloatse, tax debt & Accounting senior specialist at Latita Africa, explained that adjusting the tax brackets is important, given that South Africa follows a progressive tax system, which results in people paying more tax as their earnings increase. Not adjusting the tax tables, he said, this can result in a basic inflation-linked salary increase pushing a taxpayer into a higher tax bracket.
“For those taxpayers whose salary has remained the same, this still means that the tax takes up the same portion of their income, while their same income is worth less in real purchasing power terms,” said Moutloatse.
Moutloatse added that, given that taxpayers are overtaxed, scrapping of these tax proposals would simply mean that “they do not have to shell out more in tax on incomes that do not generally increase at the same rate.
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