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Tabling his budget in the National Assembly yesterday, Gordhan said that as from March 1, a tax credit for contributions to medical schemes would be introduced at a rate of R230 a month for the first two beneficiaries and R154 each for additional beneficiaries.
Taxpayers 65 years and older and people with disabilities would be included in the second phase of this reform, which would be implemented in 2014.
“These reforms will significantly improve the fairness of the personal income tax system,” he said.
Reform of the tax treatment of contributions to retirement funds was also envisaged. This was to take effect in 2014.
To encourage voluntary savings consideration was being given to introducing tax-exempt short- and medium-term savings products.
“The proposal is that individuals should be permitted to save up to R30 000 a year, with a lifetime limit of R500 000, in registered savings or investment products that would be free of tax on interest, dividends, or capital gains.”
The current tax-free interest income thresholds would be reviewed and possibly phased out as part of this reform.
On capital gains tax (CGT), Gordhan said that to reduce the scope for tax arbitrage and broaden the tax base further, the CGT inclusion rate for individuals and special trusts would be increased, with effect from March 1, from 25% to 33,3%; and for companies and other trusts, from 50% to 66,6%.
To mitigate the impact on middle-income earners, the various exclusion thresholds were increased.
Measures to improve the corporate tax environment included further steps to limit excessive debt financing; phased-in amendments to the market-to-market taxation of foreign currency and other financial instruments; and alignment of the governance and tax treatment of property loan stock entities with the present treatment of regulated property unit trusts.
Tax relief was also proposed for housing developers and employers who provided housing below R300 000 a unit, he said.
The levy on electricity generated from non-renewable sources would increase by one cent per kWh from July 1, and would replace the current funding mechanism for energy efficiency initiatives such as the solar water geyser programme.
The general fuel levy on petrol and diesel would be increased by 20 cents with effect from April 4, and the Road Accident Fund levy would increase by eight cents, to 88 cents a litre.
With effect from October an ad valorem excise duty at a rate of seven percent would apply to small aeroplanes and helicopters with a mass below 5 000 kg.
A duty of 10% would apply to motorboats and sailboats longer than 10 metres.