By Ann Crotty
The reduction in personal income tax rates failed to meet the widespread and optimistic expectations that prevailed in the pre-Budget weeks.
The increase in the tax brackets will help to compensate for the effects of inflation. However, even among low income earners the benefits are likely to be more than countered by the increase in so-called sin taxes that are levied on tobacco and alcohol.
The personal income tax cuts will cost the government R8,3-billion this year - the bulk of which will benefit lower income groups. Manuel said that the R8,3-billion relief is "devoted to ensuring that all South Africans share in the successes of fiscal discipline we have achieved."
The tax threshold has been increased from R21 000 to R23 000. At taxable income levels over R300 000 the annual tax saving from the reduction in personal income tax will be R3 380.
At the lower end of the income scale the R160 a year saving for individuals on R22 000 is equivalent to only 0,7 percent of their income. At R23 000 the tax saving is equivalent to 1,5 percent of income. The saving reduces to 1,3 percent at income levels of R45 000.
This suggests that the income tax cuts are most beneficial, in both absolute and relative terms, to middle income earners on annual salaries of between R50 000 and R100 000.