Tinstwalo, a fictional born-free child taxpayer painted by President Cyril Ramaphosa during the 2024 State National Address, is battling to survive the current economy.
Through the Youth Employment Services (YES), Tinstwalo managed to secure a job for herself out of the 45.5% of unemployed youth in South Africa. As a taxpayer, Tinstwalo is now grappling with the impact of increased Value Added Tax (VAT), placing strain on household budgets.
The government has now proposed a 0.5% VAT increase in the 2025/26 fiscal year, followed by another 0.5% increase the following year. While this move was anticipated, what has come as a shock is the decision to keep personal income tax brackets unchanged for the second consecutive year.
What does it mean
Tinstwalo, with no inflation adjustments, will pay more tax in real-life terms, leading to diminished purchasing power across the board.
Tinstwalo’s basic salary is R25,500; her tax is R4,080.
Tinstwalo has a child, so her medical aid is R5,300, with the employer contributing R1,500. She’s also paying a pension fund of R2,000 and an employer contribution of R3,400. Paying a provident fund of R1,500, the employer contributes R2,000.
Nonetheless, Tinstwalo doesn’t want to retire without any savings, so she has contributed R159,000 over the period she has worked. Due to the nature of her work, Tinstwalo has a car and is living in an apartment closer to work because of almost monthly fuel prices.
Tinstwalo has left her parents back home, so she pays black tax of R3,000 because the R2,315 is not enough to take care of her parents after the R130 increase by the Minister of Finance, Enoch Godongwana.
After all the deductions, Tinstwalo is left with merely R3,000 to survive the whole month. This is the reality of our crippling middle-class workers like Tinstwalo.
During his speech, the minister stated, “We are aware of the fact that a lower overall tax burden can help to increase investment and job creation and also unlock household spending power.”
Recognising the growing financial strain on taxpayers, the National Treasury has recommended providing full access to the two-pot retirement fund system in times of retrenchment, a departure from present regulations.
This indicates a concerning recognition of the economic challenges that firms and employees will face in the coming year. It is, by all accounts, a worrisome prediction.
