The tax rate will increase by 1 percentage point for all taxpayers except the lowest earners, Finance Minister Nhlanhla Nene said in his first annual budget speech on Wednesday. That takes the top rate to 41 percent. The richest individuals, who make up 1.1 percent of registered taxpayers, will account for 24 percent of the extra revenue generated.
Nene, 56, stuck to his October pledge to raise taxes and limit state spending to avoid a debt spiral and ward off further credit-rating downgrades. The measures risk derailing a tenuous recovery in consumer demand just as rolling electricity blackouts curb mine and factory output.
“Growth performance remains weak and substantial repayments of debt are becoming due,” Nene said. “It is now clear that we can no longer postpone consideration of additional revenue measures.”
Wealthy South Africans will also be hit with higher property transfer duties. The tax rate on houses worth more than 2.25 million rand ($196,000) climbs to 11 percent from 8 percent. All consumers will be affected by an increase in fuel levies, which together with other tax proposals will raise an additional 16.8 billion rand.
The ruling African National Congress had progressively lowered income and corporate tax rates since 1998, four years after coming to power. President Jacob Zuma is facing increasing pressure to create more jobs and reduce poverty in a country where almost one in four people are unemployed.