Late post-Budget amendments to come into effect from 1 April
FOLLOWING LATE amendments to the tax proposals following February’s Budget, the Ministers of Finance, Health, and Transport, announced in a joint statement that personal income tax would be subject to a weighting index that will come into effect from 1 April 2024.
This index will take the form of an adjustment to the income tax liability based on a person’s weight at the end of the tax year. A base index of 70kg for men, and 55kg for women, will be applied.
The rationale behind the move has been driven by the effect that a person’s weight has on various areas.
In announcing this new tax, the Minister of Finance indicated that the South African tax system is based on fairness, as recognised by the ‘ability to pay’ premise contained in the tax tables, whereby the rate of tax increases according to taxable income.
The new tax is an extension of this principle, and is based on the fact that heavier people consume more food, require larger clothing, and need to be provided with bigger amenities—all of which are a drain on the fiscus.
A spokesperson for the health department welcomed the new tax, stressing the fact that obesity has adverse health consequences, and this tax will induce people to start an exercise programme in order to lose weight.
The transport department also welcomed the move, as the problem of overloaded vehicles and their effect on South Africa’s road infrastructure has long been recognised.
The calculation of income tax based on this indexing principle is as follows: The individual tax liability will be determined in accordance with the tables, as is the case at present. An index will then be applied.
For male taxpayers, their tax liability will be divided by 70 and multiplied by their actual weight in kilograms. This means that for a male with a R100 000 tax liability, he will pay R100 000 if he weighs 70kg, R85 714 if he weighs 60kg, and R128 571 if he weighs 90kg.
The principle for females is the same, except a factor of 55 is substituted in place of the 70 for males.
Reaction to the proposals
As is the case with any new tax, reaction has been varied.
A spokesperson for SA Rugby slammed the proposed new tax, expressing fears that rugby players’ unions would be presenting exorbitant demands for increased salary packages to compensate players for the effects of the new tax, particularly for the props.
However, the proposals were welcomed by the National Horseracing Authority of Southern Africa (formerly the Jockey Club of Southern Africa).
Gender equality groups are outraged, since the index differentials between males and females will result in a female who weighs the same as a male paying proportionately more tax. They regard this as unconstitutional, and intend to launch a challenge in the Constitutional Court should the President sign this proposal into law.
Tax planning opportunities
A renowned tax expert has indicated that this proposal presents some interesting scope for tax planning.
By donating an income-producing asset to your five-year-old son weighing 20kg, and assuming that the asset produces income resulting in a tax liability of R100Â 000, an 80kg male could reduce his tax liability from R114Â 286 to R28Â 571.
This would, however, need to be weighed up (excuse the pun) against the 20% donations tax that would be payable on the donation.
Other considerations
The Minister of Health has indicated that he will be monitoring the suppliers of weight loss preparations to ensure that they do not overprice their products in anticipation of increased demand, whilst Virgin Active have launched an innovative new gym contract where the fees are based on the amount of tax saved.
The Minister of Finance could not be reached for comment, since he is currently busy with his morning workout.
Note: This article was written on 1 April 2024.
Steven Jones is a registered SARS tax practitioner, a practicing member of the South African Institute of Professional Accountants, and the editor of Personal Finance and Tax Breaks.