Budget speech 2017: A few potential effects on over-indebted consumers

FEBRUARY 20, 2017
Budget speech 2017: A few potential effects on over-indebted consumers

Our Honourable Minister of Finance’s budget speech is not only going to be under the magnifying glass by rating agencies this week but also by South African consumers.  

Wikus Olivier, debt management expert at DebtSafe, says that some announcements can have an unfortunate effect on over-indebted consumers. He mentions that many South Africans are already applying for credit on a huge scale as it is and if indirect taxes, income tax and/or Value Added Tax (VAT) are increased - the situation could worsen.

 According to the National Credit Regulator’s Credit Bureau Monitor (Third Quarter 2016) records held that 24.25 million people were credit-active consumers at the end of September 2016.

And 9.85 million of these consumers were classified in bad standing. The NRC’s statistics therefore indicate that the number of consumers with impaired records have increased by 178 000.

Here are a few things Olivier is concerned about (for consumers’ sake) if increases are confirmed on Wednesday, 22 February 2017:

  • INDIRECT TAXES

Include fuel and tyre levy, sugar, excise duties on alcohol and tobacco as well as incandescent globe tax for example. These increases can rip consumers’ pockets and the people that already have major debt are left helpless. These taxes can typically have an effect on the poor and middle class.

  • VAT

Value Added Tax is a type of consumption tax placed on goods and services at their final value or purchase price. VAT increases does not mean that  salaries or income increase, leaving South Africans in a daily struggle (like buying groceries for example) as some families barely have enough to get by as it is.

  • INCOME TAX

Income tax is the tax levied on your personal income. It is indicated as PAYE on your salary slip.

Consumers are holding thumbs this week for some good news and a bit of relief for their pockets. But Olivier states that if the above taxes are increased however, over-indebted consumers will not be so lucky.

They might need to apply for debt review to get rid of their ever expanding debt piles. If you are currently finding yourself in a struggling situation because of tough and unpredictable economic times, get in touch withDebtSafe to journey with you to a debt free future.