Massive tax cuts

cape town - finance minister trevor manuel's 2007 budget povides moderate personal income tax relief to counter inflation, scraps tax on retirement funds and introduces a new form of dividend tax.

also in line with government's goal to fuel growth, curb consumer spending and increase savings is the announcement of a new social security tax that will be introduced in 2010.

no cuts were made to company tax or to vat.

tax revenue has grown by an average of 17% a year for the past three years, which is much faster than the rate of economic growth.

"for the fiscal year ending in march 2007, our revised estimate for revenue is r29bn higher than the original budget," says manuel.

on the personal tax front, it will be reduced by r8.4bn to "compensate for the negative effects of inflation and to partially offset the effects on changes to taxation on medical aid contributions and car allowances."

to incentivise people to join low-cost medical aid schemes, and for the market to respond to demand, the monthly monetary caps for tax-free medical aid contributions will increase from r500 to r530 for the first two members and r300 to r320 for each additional beneficiary.

the primary rebate rate is increased from r7 200 to r7 740. people younger than 65 who earn below r43 000 a year will no longer pay tax. the same applies for people over 65 r69 000 a year.

"i appeal to taxpayers to use this relief to first settle their debts or save, rather than consumption," says manuel.