In the 2023 financial year budget, Personal Income Tax (PIT) brackets were fully adjusted for inflation, which increased the tax-free threshold from R91 250 to R95 750 and that was the last time the treasury (‘government’) adjusted brackets.

In 2024 South African taxpayers were introduced to what is now becoming a norm, bracket creep, revenue being raised through personal income tax by not adjusting the tax brackets for inflation or above / below inflation.

Bracket creep, also known as fiscal drag, is a consequence of inflation – driven salary adjustments pushing a taxpayer into a higher tax bracket without an actual increase in tax rates. This results in a higher tax burden for individuals, effectively raising their tax payments without a formal tax hike.

Essentially, the government “drags” more taxpayers into paying tax or paying at a higher rate due to inflation eroding the value of tax thresholds, basically government doesn’t offer inflationary protection to salaries.

The proposed budget through no inflationary adjustment to tax brackets and rebates targets to mobilise R15,5 Billion and a further R1,5 Billion from by none – inflationary adjustment to medical tax credits. Combined, this will raise R17 Billion for the state through eroding the disposal income of wage earners in the economy.

A burden on the 3 % of people who already pay 76 % of all personal income tax in South Africa, which is the shrinking middle class, of which some of this class make up the “working poor”.

Matters are made worse by the replacement the so called lost revenue from the court and political resistance inspired withdrawal of the VAT rate increase of 0.5 % in 2025 and a further 0.5 % in 2026.

Treasury then proposed an inflationary aligned increase in the general fuel levy for petrol and diesel to R4.01c/l and R3.85c/l respectively, which, if approved by Parliament, will be effective from 4 June 2025.

Understanding that fuel is inflationary – higher fuel prices can contribute to headline consumer price inflation increases, pushing up the price of goods and services, items that require fuel as input to produce, cost push inflation.

This price transmission may hurt the consumer equal if not worse than the withdrawn VAT adjustment. Now, with unadjusted tax brackets and increase in general prices in the economy can inflict a serious crisis for taxpayers.

The FNB/BER Consumer Confidence Index (CCI) recorded a plunge from -6 to -20 index points during the first quarter of 2025 as tax shock rocks consumer sentiment – this is consistent with the average decline in the past years.

Final household consumption has been on a low as well, with 2024 measuring a growth 1 %, a 0.3 % increase from 2023, due to the “two – pot system” pension withdrawals boosting consumption. Now, with these pressures on wages, South African households may potentially consume less this year.

As so much as the budget proposal from the minister presented measures to stimulate an economy struggling to significantly grow to a point of improved government revenue generation without need to punish taxpayers in the long run, it surely will achieve the opposite in the short run and undermine the already low household savings ratio and culture, while unemployment increases dependency ratios.

It’s unfortunate that the taxpayer has to provide solutions to economic mismanagement caused by the state overtime.

This taxpayer , in the 3 %, also is an individual who would ordinarily not qualify for state benefits such as state subsidised housing, NSFAS for their children, indigent benefits and others.

An individual that still need to pay municipal rates that tend to be adjusted above inflation as per treasury recommendations, yes, the same treasury; an individual that pays for their own healthcare; their own transportation; and every other thing.

The tabled proposed budget of the 21 May 2025 still needs to be debated and adopted by parliament – it is at that sitting taxpayers, fragile middle class, hope that economic sanity will prevail and alternative means that don’t place state economic mismanagement at the purse of the taxpayer through bracket creep.

Bongani K Mahlangu is a B Com Economics, B Com Honours Economics and Master of Commerce in Economics graduate from the North – West University. Has worked in Banking, Competition Commission of SA, public sector and in advisory. Often serves as a political economic analyst and commentator on radio and television networks