Do you speak Budget? Budget Speech terms translated into English.

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Do you speak Budget?

Today’s National Budget Speech is one of the most important economic events of the year. Indicating to both individuals (natural persons) and companies (and other legal persons) how and how much they’ll be taxed, you’ll need to pay close attention to find out whether to save every penny to cover your expenses, or maximise your slightly healthier income by investing for the future.

Financial jargon can however be tricky to decipher, especially for those not in the industry. That’s why we’ve put together this glossary of the most common Budget Speech terms. Keep it handy today, and you’ll have no problem figuring out what 2018’s Budget means for you. 

• Bracket creep: Inflation pushes a person’s income into higher tax brackets. The result is an increase in income taxes, but no increase in real purchasing power.
• Capital gains tax (CGT): A type of tax levied on capital gains which is the profits that an investor realises when he sells a capital asset (property) for a price that is higher than the purchase price. CGT forms part of income tax.
• Carbon tax: A tax on businesses that produce carbon dioxide through their operations. Designed to deter the emission of greenhouse gases.
• Corporate income tax (CIT): A tax imposed on the taxable income of a company or close corporation.
• Discretionary allowance: Refers to the amount of funds that may be exported overseas by South African citizens over the age of 18. The allowance is limited to R1 million per calendar year.
• Donations tax: Tax payable on the value of any donation. Donations tax is levied at a flat rate of 20%.
• Employer tax incentive: A tax incentive that encourages employers to hire young and less experienced workers.
• Estate duty: A tax payable on the estate of every person who dies and whose nett estate is more than R3.5 million. Estate duty is charged at the rate of 20%.
• Excise duties: Excise duties are a tax mostly levied on high-volume daily consumable products, such as alcohol and tobacco products, as well as certain luxury items like electronics and cosmetics.
• Fiscal drag: During inflation, rising incomes draw people into higher tax brackets, but their real incomes may fall.
• Fuel levy: An excise tax imposed on the sale of fuel.
• Gross domestic product (GDP): Gross domestic product is the combined value of a nation’s goods and services produced within its borders for a specific time.
• Income gap: Also referred to as income inequality, the income gap is the difference of economic well-being among individuals in a country’s economy.
• Income tax: Tax imposed on individuals, trusts or other legal entities that varies according to their respective income or profits. Income tax on business entities is often referred to as corporate tax.
• Inflation: Inflation refers to the rising price of goods and services over time.
• Marginal tax rate: The percentage of tax applied to your income for each tax bracket in which you qualify.
• Personal income tax (PIT): Income tax is the normal tax which is paid on your taxable income – a salary, for instance.
• Purchasing power parity (PPP): The theory stating that the exchange rate of two currencies results in equal purchasing power in an efficient market. So, if USD1 is worth R10, USD1 in the United States should buy the same amount in goods and services that R10 can buy in South Africa.
• Securities Transfer Tax: A tax levied on the transfer of a security. A security can be a share or a depository receipt in a company, or a member’s interest in a closed corporation.
• Sin tax: An excise tax levied on certain goods deemed harmful to society, such as alcohol and tobacco, sweets, drugs, soft drinks, fast food, coffee, sugar, gambling and pornography.
• Sugar tax: A tax on sugar-sweetened beverages. The objective is to help reduce excessive sugar intake based on a concern for public health.
• Tax bracket: This refers to a range of incomes that are subject to a certain income tax rate. Tax brackets result in a progressive tax system. Accordingly, low incomes fall into tax brackets with comparatively low income tax rates, while higher earnings fall into brackets with higher rates.
• Tax revenue: The total amount of money that the government receives from taxation. In South Africa, most of the government’s tax revenues are derived from three major taxes: personal income tax (PIT), corporate income tax (CIT) and value-added tax (VAT).
• Transfer duty: Transfer duty is a tax charged on the sale or transfer of immovable property which is acquired by way of a transaction or otherwise.
• Trusts: A trust is a legal institution in which one party (the “settlor”) gives another party (“the trustees”), the right to hold title to assets for the benefit of third parties (the “beneficiaries”). Trusts are established to provide legal protection for the settlor’s assets, to make sure those assets are distributed according to the wishes of the trustor, and to save time, reduce paperwork and even avoid or reduce estate taxes.
• Tyre levy: New and re-treaded pneumatic tyres are subject to the payment of an Environmental Levy, allocated for re-cycling.
• Value-Added Tax (VAT): A consumption tax that is placed on a product whenever value is added at a stage of production and at the point of retail sale. VAT applies to most products consumers buy
• VAT hike: An increase in Value-Added Tax.
• Wealth tax: A tax based on the market value of assets that are owned, as opposed to a person’s income. Assets can include cash, bank deposits, shares, fixed assets, private cars, assessed value of real property, pension plans, money funds, owner-occupied housing and trusts.
• Pay-As-You-Earn: An income tax withheld from employees' wages and paid directly to the government by the employer. The amount withheld and paid by the employer is a “prepayment” of income taxes and is sometimes refundable.
• Withholding tax: Generally a tax paid by the payor of the income, on behalf of the recipient of such income.