ANALYSIS: You don’t have to be rich to be hit by Gordhan’s harsh new dividend tax
SA’s wealthy individuals are most probably testing their financial wings to fly to more lenient tax jurisdictions after drastic tax proposals announced by Finance Minister Pravin Gordhan in his budget speech on Wednesday. Although there has been no increase in the estate duty and donations tax rate (wealth taxes), the inclusion of a hefty new top marginal income tax rate of 45% and the whopping increase of the dividend withholding tax rate to 20% will drastically increase the tax burden of "wealthier" South Africans. However, Patricia Williams, tax partner at Bowmans, warns that the fallout of the more than 33% increase in dividend withholding tax — from 15% to 20% — is not restricted only to individuals who would fall within the "top tax bracket", but applies to most individuals. She says it will also apply to low-income earners who hold shares as part of a broad-based black economic empowerment scheme. "This change is accordingly potentially detrimental to broad based share owners...
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