Finance Minister Nhlanhla Nene is currently presenting the first full national budget speech for 2015 to the Parliament and it seems that some of the things in the budget are coming as a clear shock to so many people, starting from the fact that income tax has been raised for those who earn more than R181 900 per year.
Shocking people further, in the budget was the hike of fuel levy by a whooping 30.5 cents per liter and and the increase to 50c/liter in the levy for the Road Accident Fund. This will increase the general fuel levy to R2.55 per liter for petrol and R2.40 per liter for diesel. This would mean that the increase will be about 26% of the current fuel price.
This is a strategic point where the government stands to make a lot of profit. the finance minister obviously made judicial use of the gap afforded him by the fall in the international price of oil.
Nhlanhla made certain to keep spending relatively under control over the next three years and therefore, in line with previous figures in October’s mini budget. Take a look at the major points of the budget in a nutshell:
• Budget deficit of 3.9% (expected to narrow to 2.5% in 2017/18).
• Debt stock as a percentage of GDP is expected to stabilise at 43.7% of GDP in 2017/17 (estimated debt service costs of R126.4bn in 2015/16); it will rise by 9.9% over 2014/15 and 10.1% over the next three years.
• The main budget non-interest expenditure ceiling has been reduced by R25bn over the next two years.
• Total revenue (consolidated) will increase from R1 091bn in 2014/15 to R1 188bn (32.2% of GDP compared to 29% in last year’s budget) and total expenditure from R1 243bn to R1 351bn. The GDP in 2015/16 is estimated at R4 191bn.
• Increases in personal income tax rates and the general fuel levy are set to add R16bn to gross tax revenue in 2015/16.
• Real growth in non-interest spending will average 2.1% over the next three years and will be more closely aligned to long-term average real GDP growth from 2017/18. Debt service costs will still grow fast (10.1%).
• Capital remains the fastest-growing item of non-interest spending over the medium term, with compensation and goods and services growing at a slower rate.
• The biggest item on the budget, education and related functions, will rise by 8.0% over the three years.
Specific spending programmes over the next three years
Over the next three years, government will spend:
• An additional 7.9% per year, increasing expenditure from R1.24trn in 2014/15 to R1.56trn in 2017/18.
• At least 60% of non-interest expenditure to improve social services and alleviate poverty.
• R647bn on basic education, including R36.7bn on school infrastructure.
• R634bn on local development and social infrastructure, including R145.5nn on municipal infrastructure.
• R502bn on health, with R46.6bn on the HIV and Aids conditional grant.
• R498bn social protection.
• R197bn on post-school education and training.
• R18bn on providing free meals to over 9 million learners.
• Increase marginal personal income tax rates by one percentage point for all taxpayers earning more than R181 900, and adjusting tax brackets and rebates to account for fiscal drag.
• Raise the general fuel levy by 30.5c/litre. The Road Accident Fund levy will also increase by 50c/litre, bringing total fuel levy increases to 80.5c/litre.
• Take further steps to combat base erosion and profit shifting.
• Provide a more generous turnover-tax regime for small businesses.
• Increase excise duties on alcohol and tobacco products.
• Review the diesel refund scheme.
• Strengthen the energy-efficiency savings initiative.
• Raise the electricity levy from 3.5 cents per kilowatt hour to 5.5c/kWh.
• Change transfer duty rates and brackets to provide relief for middle-income households. Property of up to R750 000 will now be exempt from transfer duty.
• GDP growth is estimated at 1.4% in 2014, 2.0% in 2015, 2.4% in 2016 and 3.0% in 2017. It is considerably lower than last year’s estimates.
• Export growth is expected to accelerate rather sharply from 0.9% in 2014 to 5.0% in 2017, while imports will grow an estimated 4.6% in 2015 and accelerate to 5.5% in 2017.
• Consumer inflation will fall to 4.3% in 2015 and accelerate to 5.7% in 2017.
• Capital formation is also optimistically forecast to grow from 3.2% of GDP in 2013 to 6% in 2016.
• Household comsumption is set to grow by 2.0% in 2015 to 3.0% in 2017.
• The balance of payments wil stay in deficit (-4.5% of GDP in 2015, -5.2% in 2017).
• Sin taxes will rise as follows: beer 7c; fortified wine 19c; ciders and alcoholic fruit beverages (330 ml) 7c; unfortified wine 15c; sparkling wine 48c; spirits 377c; cigarettes (20) 82c; cigarette tobacco 91 (50g); pipe tobacco 26c (25g); cigars 309c (23g).