Reader’s letter: Minister of finance tans pensioners

Henry

Adam Jacobs writes:

In his latest budget speech, the finance minister made no changes to tax scales and tax-deductible rebates.

In 2023, the inflation rate increased by 6%. Suppose a pensioner was lucky to also get a 6% increase in his/her pension. Then the sums for this year look like this:

A person who received a pension of R240 000 per year, or R20 000 per month, last year had a taxable amount of R43 432. But with primary, secondary and tertiary rebates of R29 824 deducted, the net tax was R13 608.

With a 6% increase in pension, the income rises to R254 400 per year this year.

Now the tax amounts to R47 176. This is 8.5% more. Deduct the rebates, then the net tax amounts to R17 354. This is an increase of 27.5% on that of last year.

If the sum were made for a person who received a pension of R360 000 per year last year and such a person also gets a 6% increase, and the same exercise is done, the net tax increases by 13.8%.

The conclusion: Pensioners’ taxes will rise this year much more than a possible increase of 6% in their pension. What’s more, the lower the pension, the more their tax percentage increases. Inflation is indeed the finance minister’s great friend and pensioners’ greatest enemy for over 72 years.