About everyone knows by now that the taxman's "not-so-secret" weapon is fiscal drag - but what many people do not know is how often he uses the weapon to his advantage and our disadvantage.
Fiscal drag is caused by inflation. Salaries and wages mostly go up in line with inflation.
This unfortunately does not mean you earn more in what is called real terms (the nominal amount less inflation) because as your salary goes up so does the cost of things on which you spend money.
But almost every time your income goes up you go into a higher tax bracket.
Where you may have been paying 20 cents in every rand before a salary increase, after the increase you may pay 21 cents in every rand. So in real terms you are earning less after tax than you were before you received your increase.
(Incidentally don't turn down an inflation-linked salary increase because you will pay more tax. Even if you go into a higher tax bracket you will still be better off than if you had received no increase.)
These backdoor tax increases are however not limited to tax brackets. They also affect the limits or incentives the taxman allows to reduce your tax commitment.
Take for instance the incentive to encourage all of us to save money. In terms of this, the first R2 000 you earn in interest from your savings is tax-free. The snag is that the amount was last adjusted in 1991 - R2 000 then is worth considerably less today. The figure should now be closer to R3 000.
Chris Bvsenberg, Sanlam's chief consultant for employee benefits, says fiscal drag is also eating away at pension benefits and incentives.
For example, the R120 000 which you are allowed to deduct from your pension lump-sum at retirement before tax, would now have been at almost R340 000 if inflation had been taken into account.
Likewise, the incentive to encourage you to make greater contributions to your pension fund, over and above your normal contributions, should now be pitched at a level of R8 000 tax-free instead of the current R1 800.