HOW GOVT PUT E2 000 BACK INTO YOUR POCKET

MBABANE – Half a loaf is better than nothing! The more closely you analyse Finance Minister Neal Rijkenberg’s Budget, the more it becomes clearer that actually, you will not literally be left worse off.

In actual fact, there is something that will be left in your pocket once the new proposed Pay-As-You-Earn tax structure is implemented. 
Rijkenberg said the government intended to increase the minimum taxable income threshold from E41 000 to E55 000 annually.

This revision in the primary rebate will take significant tax pressure off the lower income earners and offset some of the increased expenditure pressures on low income earners through the consumption tax revision. Government also intends to increase the marginal tax rate payable by income earners above E 250 000 from 33 per cent to 36 per cent.

This means that those earning E4 583.33 and below per month will be exempt from paying any taxes. Previously, those who were exempt from tax were those earning E3 416.67 and below.

NEW TAX BRACKET

The proposed tax rate will introduce a new tax bracket of those earning above E250 000 per month.
These individuals will pay E62 000 plus 36 per cent of the excess of E250 000.
The excess of E250 000 means the difference between the E250 000 and the individual’s salary.

Currently, a person earning E10 000 per month or E120 000 per year pays E20 000 plus 25 per cent of the excess of E100 000, minus the tax rebate. This translates to E20 000 plus 25 per cent of E20 000, minus the tax rebate (E8 200).

This brings the total tax to E16 800 per year or E1 400 per month.
The proposed tax structure will mean that the individual earning E10 000 per month will pay E18 000 plus 25 per cent of E20 000, minus the tax rebate of E8 200.

This can be calculated to E14 800 per year or E1 233 per month.  This brings the total saving on tax to E2 000 per year or E166.67 per month.
For the saving, a person can buy two litre cooking oil at E35.99, 2.5 kg Ligugu Maize Meal for E21.99,  two kilogrammes of sugar beans at E42.99, two kilogrammes Buhlalu Rice at E27.99 , two kilogrammes brown sugar at E32.99 and 500 grammes of salt at E3.50.

These groceries can last one person for one week, and a family of four for two days. It can be argued that the money will barely cushion the taxpayer against inflation which will be brought about by the fuel levy as it is expected that food prices and transport costs will increase. It will also barely cushion the taxpayer from the proposed value-added-tax on electricity.

For an individual who uses E500 on electricity, the VAT will be E75. Currently, a unit of electricity costs E1.75.  Should the Eswatini Electricity Company increase electricity by the value of the VAT, which is 15 per cent, it will mean that for one to purchase the same number of electricity units per month at E2.01, they will have to part will E575.

Meanwhile, more calculations showed that as the income increases, the value of the savings will decrease. Individuals earning between E55 000 to E250 000 will get the same savings of E2 000 per year, or E166.67 per month.

START TO INCREASE

For people earning E300 000, the saving will decrease to E1 000.
Those earning above E300 000, their tax will start to increase from the current structure.
For example, a person earning E350 000 currently pays E7 400 per month under the current tax structure.

However, under the new structure, they will pay E7 483 per month, an increase of E83 per month or E996 per year.  Again, regarding the value added tax (VAT) on electricity, experts say the minister tried to cushion the consumers by suspending the tariff increase by Eswatini Electricity Company (EEC).  Our well-placed sources said EEC wanted nothing less than 10 per cent tariff hike for the year 2020/21-21/22 financial years.

That means if government allowed the tariff increase and further put VAT on electricity, it was going to be a double blow for consumers. “They were definitely to be left worse off,” one tax expert from the University of Eswatini, who elected to remain anonymous, said.

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