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Pravin Gordhan

JOHANNESBURG- South Africa’s rand slipped sharply after Finance Minister Pravin Gordhan cut his 2016 growth forecast yesterday to 0.9 percent, down from a previous forecast of 1.7 percent, citing a recent drought.

At 1220 GMT the rand was 1.6 percent weaker to 15.420 per dollar from 15.3350 before the budget began.

Although Finance Minister Pravin Gordhan surprised many by not raising the top tax bracket of 41percent, the rich were targeted by increasing capital gains tax, as well as transfer duty on property sales above R10m.

The government proposes to increase the inclusion rate for capital gains for individuals from 33.3 percent to 40 percent, and for companies from 66.6 percent to 80 percent. This will raise the maximum effective capital gains tax rate for individuals from 13.7 percent to 16.4 percent, and for companies from 18.6 percent to 22.4 percent.

The annual amount above which capital gains become taxable for individuals will increase from     R30,000 to R40,000. The effective rate applicable to trusts will increase from 27.3 percent to 32.8 percent. These new rates will become effective for assessment years beginning on or after March 1, 2016.

The transfer duty rate on property sales above R10m will rise from 11 percent to 13 percent. This new rate will become effective for property acquired on or after March 1, 2016.

Rakesh Seethal, Head of Employment Taxes and Tax Risk, Barclays Africa Tax said the focus of today’s budget was on tax relief to lower and middle income earners, and while higher income earners will experience less tax savings, they also have some relief on marginal taxes to look forward to.

“Whilst a 7 percent increase in the Capital Gains Tax inclusion rate was announced, it translates to a less than 3 percent increase in actual personal income tax.”- Fin24.