Minister of Finance, Chris Liebenberg, did increase your tax this year even though the manner in which he adjusted the tax brackets suggested he was giving R2 billion back to taxpayers.
But fiscal drag, also known as bracket creep, has kept Liebenberg on top.
Fiscal drag is caused by inflation pushing people into paying an ever increasing higher rate of tax.
In other words, if the inflation rate is 10 percent and you receive a 10 percent increase you receive nothing extra in real terms, but by earning more, you are pushed into a higher bracket of taxable income with a higher percentage of tax payable (called the marginal rate of tax). The result is you pay more tax and you have less to spend.
Sanlam tax advisor Louwrens van der Vyver told Personal Finance that what Liebenberg has done (ignoring the transition levy) is reduce the rate at which fiscal drag has increased- "he has not stopped the process".
Figures calculated by Van der Vyver show that people on lower and middle income scales have received less benefit in percentage terms than those on higher earnings from the latest concessions.
At a taxable income of R30 000 and R40 000, the marginal rate of tax increases dramatically from 21 percent to 30 percent at R30 000, and from 30 percent to 41 percent at R40 000.
This means the worst hit by fiscal drag are taxpayers earning around these levels.
The major change in the tax brackets was the increase in the threshold for the top marginal rate of 45 percent from taxable income of R80 000 a year to R100 000. Once taxable income goes above this level the effect of fiscal drag is not so pronounced.
Those receiving more than the inflation rate in wage and salary increases this year are likely to have beaten the effects of fiscal drag.
The confusing thing about this is that taxpayers who receive no salary increase this year will find that in rand terms their pay packet will be bigger with the latest tax adjustments.
But Van der Vyver points out that the extra money you will receive will not cover the effect on the buying power of your rand of the 7,35 percent inflation rate increase over the past year.
South Africa has a progressive tax structure but it is not correct to believe that it is not worth earning more because the effect of tax will result in you earning less than you did before.
After making an adjustment for inflation, you may be worse off if your increase was on or below the inflation rate because of fiscal drag. However you will be better off than receiving no increase at all.
The calculations made by Van der Vyver show someone earning a taxable income of R15 000 a year in 1990 was paying an average rate of tax of 6,27 percent (R940). This is R6,27 for every R100 of taxable income.
With increases equal to the inflation rate the same person for the 1997 tax year will be earning a taxable income of R32 995. On the new tax tables, as a result of fiscal drag, the taxpayer will now be paying R11,63 for every R100, or a total of R3 839.
The marginal tax rate has grown at an average of 9,23 percent a year over seven years ago and the person is effectively 5,7 percent worse off.
At the top end, a person earning a taxable income of R98 000 in the 1990 tax year was paying an average rate of tax of R34,81 in every R100 of taxable income earned (a total of R34 110).
A person receiving salary increases equal to the inflation rate would now be earning a taxable income of R215 567 but would be paying R38,76 in tax for every R100 of taxable income. The marginal tax rate has grown at an average of only 1,55 percent a year but the person is still effectively six percent worse off.