Finance Minister Trevor Manuel has made good his pledge to tax-payers, with sweeping income tax cuts in the 2001 Budget, promising more cuts in future if taxpayers play the game (see The Main Ways the Budget Will Affect Your Pocket below).
Offering taxpayers an apple in the form of a R8.3 billion income tax cut, Manuel held out the hope of further income tax reductions as tax collection improved.
"Pay your taxes now, and everyone will pay less in future," he said.
But, Manuel warned, the tax authorities would be tough with anyone who spoiled the game by dodging taxes.
More than a million taxpayers who were behind with taxes could expect a call this year from the special centre set up by the South African Revenue Service (SARS), he said.
In the centre's first week of operation, 17 000 taxpayers had been contacted.
The SARS budget would be increased over the next three years to increase efficiency and clamp down on tax dodging.
"As citizens, meeting our tax obligations and acting within the letter and spirit of the law is not optional," Manuel said.
"Corporate and private citizens who evade the law are committing a crime and depriving the government of the resources needed to address poverty, fight crime and achieve other social and economic objectives.
"Tax evasion also undermines investor confidence and increases the burden of ordinary tax-paying citizens."
Tabling a Budget focused on growth, Manuel said it was time for everyone to share in the "sweet fruit of liberty" now that years of fiscal discipline had paid off.
Tax moves designed to boost growth include:
* Income tax cuts to release household spending power;
* Tax incentives for job creation and investment;
* Tax allowances for small business;
* Diesel tax concessions for farmers and other producers; and
* The scrapping of VAT on illuminating paraffin to reduce energy costs for the poor.
The income tax cuts - through a rise in rebates and the widening of the tax bands - will put R8.3 billion back into taxpayers' pockets, with middle-income earners benefiting the most in percentage terms.
If you earn R24 000 a year, for instance, you will save R340 or about 65 percent in tax; if you earn R70 000 you will save R1 680 or 12 percent; if you earn R90 000 you will save R2 780 or 13 percent and if you earn R300 000 you will save R3 380 or 1.1 percent. (See tables in New rates lighten everyone's tax load.)
For most people the worm in Manuel's apple will be the hike in "sin" taxes: higher excise duties will raise the price of a can of beer or cider by 2.3c and a packet of cigarettes by nearly 34c.
But the damage to taxpayers' wallets from excise duty increases - R779 million - is slight compared to the income tax bonanza.
Manuel also announced a delay in the implementation of capital gains tax (CGT) until October 1. The new measure, which will bring profits on shares, unit trusts and other assets into the tax net, was due to take effect on April 1.
Manuel said the postponement was granted to give business, and particularly financial companies, time to install information systems to comply with the new tax.
CGT is designed to prevent taxpayers from converting income into capital gains in order to escape income tax.
Manuel also:
* Dropped the duty on soft drinks by 2c a litre;
* Raised social pensions by R30 to R570 a month;
* Increased the fuel levy by 2.4c a litre on petrol and 1.9c on diesel;
* Upped the annual travel allowance to R140 000 a person of 12 years and older and R45 000 a child under 12, but left most exchange controls unchanged (see Better returns without asset swap);
* Cut donations tax and estate duty; and
* Simplified the 21-year-old system of customs and excise duties, cutting duties on cosmetics, clocks, cellphones, cameras, computers, spectacles, binoculars, dishwashers, video cameras and a range of other goods.
Manuel left VAT, perks taxes and retirement taxes unchanged.
But he gave notice to banks and to company directors that their days of paying low taxes are over.
"When one sector of the economy pays less than its fair share of tax, the burden on all other taxpayers is raised," the National Treasury said in the Budget Review published with the Budget. "Government is concerned at the low effective tax rate on banks."
Banks had been able to avoid or defer tax through all sorts of mechanisms, the Treasury said, and the government intended to make sure the banks paid "an equitable share" of tax.
The possibility of bringing all company directors, whose fees currently fall into the provisional tax system, into the Pay As You Earn (PAYE) system was also being considered, the Treasury said.
THE MAIN WAYS THE BUDGET WILL AFFECT YOUR POCKET
THE SWEET FRUITS
Last year
This year
Income tax threshold Increased
Below the age of 65
R21 111
R23 000
Aged 65 and above
R36 538
R39 154
Tax rebates Increased
Primary (for everyone)
R3 800
R4 140
Secondary (age 65 and over)
R2 900
R3 000
Top marginal tax bracket starts at higher income
R200 001
R215 001
Provisional tax threshold increased
Below age of 65
R1 000
R2 000
Age 65 and above
R50 000
R80 000
Tax-free interest income increased
Below age of 65
R3 000
R4 000
Age 65 and over
R4 000
R5 000
Estate duty reduced
25%
20%
Donations tax reduced
25%
20%
Social pensions increased
R540 a month
R570 a month
VAT on illuminating paraffin scrapped
14%
zero
Customs & excise duties reduced
Examples: Perfume
10%
7%
Cosmetics
10%
5%
Video recorders
10%
7%