How the National Budget is impacting consumers

THE National Budget and an increase in the cost of living will hit consumers, who should reassess their budgets now and start saving as much as possible before more taxes come in next year.

- NICOLA MAWSON

On Wednesday, both the inflation numbers and the National Budget came out.

The Consumer Price Index showed that inflation climbed from 2.7% in March to 2.8% in April, while Finance Minister Enoch Godongwana indirectly reduced people’s take-home pay and added more subtle taxes.

Godongwana had a R75 billion revenue hole, which he needed to fill somehow after two proposals to increase VAT were swept off the table.

Harry Scherzer, actuary and CEO of Future Forex, said the National Budget is a “mixed bag for South African consumers. On the positive side, the decision to hold VAT steady at 15% avoids placing additional strain on household budgets. However, the increase in the fuel levy will hit consumers hard.”

Scherzer explained that, in a low gross domestic product environment, higher fuel taxes will have a direct impact on food, transport, and other costs.

“On top of that, above-inflation hikes in sin taxes will further dent disposable income, especially for lower-income earners”.

Ricardo Teixeira, COO at BDO Wealth Advisers, said National Treasury estimates that by keeping the tax brackets unchanged, it will raise an additional R15.5bn in personal income tax in the current tax year.

He stated that “anyone earning R96,000 or more will inevitably have less take-home pay each month” due to unchanged income tax thresholds and reduced medical tax credits.

Teixeira noted that a 4% increase in the fuel levy and 6.75% on “sin” taxes will impact monthly budgets. From the fourth of June this year, the general fuel levy will increase by 16 cents per litre for petrol, and by 15 cents per litre for diesel.