Here's a look at how the Budget will impact you:
Revenue
The tax revenue target of R1.345-trillion for the 2018/2019 financial year consists of R505.8-billion from personal income tax, R348.1-billion from VAT, R231.2-billion from corporate income tax, R77.5-billion from fuel levies, R97.4-billion from customs and excise duties and the balance of R84.8-billion from other sources. In order to meet expenses, it is expected that government will need to borrow a further R191-billion.
Expenses
Expenditure for the 2018/19 year is budgeted at R1.671-trillion, with the bulk being allocated to education (R351.1-billion) and social development (R259.4-billion). Health has been allocated R205.4-billion, security R200.8-billion, economic development R200.1-billion, community development R196.3-billion, other expenses R194.2-billion, and general public service R64-billion.
Education
Education will again be allocated the biggest slice of the Budget. Former president Zuma announced in fee-free higher education and training for families with an annual household income of less than R350,000 at the ANC national conference in December 2017.
An additional R57-billion has been allocated to fund this over the medium term. This includes a subsidy to universities designed to allow zero percent fee increases for families with an annual income of between R350,000 and R600,000.
NSFAS loans will be converted to bursaries for returning students whose household income is less than R122,000 per year. NSFAS will also provide bursaries for undergraduate university and TVET students with a household income of less than R350,000 per year. This will cover the full study cost, tuition fees, study material, subsidised meals, accommodation and travel allowance.
Social grants
While government expects 18.1-million South Africans to be receiving social grants by 2020, the increase in the VAT rate should allow for the rate of increases in social grants to be accelerated going forward.
VAT
As expected, the VAT rate has been adjusted for the first time since 1993. Basic food exemptions will remain, and the impact on the poor, government claims, will be minimal. The VAT rate will increase by 1 percentage point to 15 percent, effective April 1, 2018.
Personal income tax
Following the increase in the maximum tax rate for high-income earners last year, there was concern that this could increase again. Personal income tax is still the biggest income source for government.
The effect of fiscal drag is not always clear in the short term, but has a far-reaching impact. In general, in a progressive tax system, individuals are pushed into a higher tax bracket as their salaries increase over time – this is referred to as "bracket creep". To help mitigate this, the tax brackets are adjusted accordingly, to adjust for inflation.
The tax threshold has been increased to R78,150 (R75,750 - 2017/2018, R75,000 - 2016/2017, R73,650 - 2015/2016, R70,700 - 2014/2015). The primary rebate has also been increased to R14,067 (R13,635 - 2017/2018, R13,500 - 2016/2017, R13,257 - 2015/2016, R12,726 - 2014/2015). Government promised in the Budget that Treasury will be limiting bracket creep further. The tax thresholds and primary rebate increases have decreased every year for the past four years.
The medical aid tax credit will also be adjusted from R303 for the primary member and R204 for each additional member to R310 and R209 respectively. This is much lower than the official inflation rate, and is well short of what the medical aid inflation rate is.
Transfer duty
There has been no increase in the value at which transfer duty becomes applicable – property valued above R900,000.
Capital Gains Tax
The effective rate remains unchanged at 18 percent for individuals and special trusts.
Dividend Withholding Tax (DWT)
After the increase in DWT in the last Budget, it was expected to remain unchanged at 20 percent. This still makes investing in a tax-free investment account much more attractive, as DWT is not applicable to funds held in them.
Fuel and Road Accident Fund levy
The general fuel levy will increase by 22c (30c 2017/2018) and the RAF levy by 30c (9c 2017/2018). This will take effect on April 4, with the monthly petrol-price adjustment. This will push the fuel-levy portion of the price of petrol to R3.37/l (R3.15/l 2017/2018) and to R3.22/l (R3.00/l 2017/2018) for diesel.
Sin taxes
As usual, taxes on alcohol and tobacco have been increased substantially.
While South Africa faces a new dawn, the budget is surprisingly balanced and not overly ambitious. The deficit is still a problem, and there is even less room to extract more revenue from taxpayers.
While government has recognised the need to curb the ever increasing expenditure, more needs to be done in this regard.