EP17: Bracket Creep: The Silent Tax That’s Shrinking Your Paycheck

In this episode of The Rev Room, we expose bracket creep — the sneaky tax mechanism also known as fiscal drag. Wayne Turner, BizRev’s Financial Director and tax specialist, joins Noloyiso Mbenga to unpack how inflation-linked salary increases are pushing South Africans into higher tax brackets without any real gain in buying power. Together, they break down the last five years of tax bracket adjustments, the R60 billion impact, and what this silent tax means for both employers and employees. If you’ve been wondering why your paycheck feels lighter, this conversation will give you the clarity you need.

Key Takeaways

1. Bracket creep explained: When tax brackets aren’t adjusted for inflation, you end up paying more tax without actually earning more in real terms.
2. The hidden cost: SARS’ decision not to adjust brackets in 2024–2026 means South Africans are effectively paying billions more in taxes without noticing it immediately.
3. Compound effect: One year might not sting, but repeated bracket creep can cut 15–20% of net pay over time — a silent but devastating blow to household income.

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Transcript

hi there
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hello everyone and welcome back to the Rev room
SARTS is stealing your money
and Wayne is gonna tell us exactly how
SARS is doing that
Wayne ooh
how are you I'm well
thank you Nola all the better that it's Friday
okay then uh
first question that I have for you
can you tell us what is bracket trip
okay Nola
thank you for that
so if we look at bracket creep in in SA's world
bracket creep is called also called fiscal drag okay
it's the sneaky tax increase
that happens when your salary rises with inflation
but SARS
doesn't push up the personal income tax brackets
and related rebates okay
by the same amount you then drift into a higher bracket
or you lose the value of the rebates
even though your buying power has not really improved
okay to be blunt
SARS is stealing money from the poor
that's oh
that's our answer
and how does this actually affect the taxpayers
so what actually happens is every year
what source used to do
they used to actually increase the brackets
by inflation so effectively
if an employee receives a salary increase
then the brackets also go up
and it doesn't affect their their tax bracket
in the 2025 26 budget for the third consecutive year
the National Treasury did not adjust
the individual tax tables in line with inflation
this decision has far reaching implications
for both employers and employees okay
and what are the disadvantages if this continues
yeah so this
lack of
inflationary relief is creating what I call
a silent tax
that is slowly reducing the net pay of employees okay
for most South Africans
salaries increase monetary every year
through wage increases
inflation adjustments or fringe benefits
this pushes salaries into a higher tax bracket
but since the tax brackets have not moved
employees are paying more tax on income
that has not increased in purchasing power okay
this phenomenon bracket creep
is largely unnoticed by employees
until their net pay starts shrinking
despite pay increases okay
can you take us on what has happened for the last
five years on the tax tables
so when we look at the last five years from 2021
I went back five years basically 21
22 23
they actually increase the inflation
so if I look at the 21 22
SARS increased the bracket by 5%
which was slightly above inflation OK
in 2223 the brackets adjusted by 4.5%
that was in line with inflation in that tax year
in 2024 again
4.9% in line with inflation okay
but for 2024 25
no adjustment 25
26 no
no adjustment what this means is that it's compounded
so and and people say no
it's a small amount but this
the total annual impact
is projected to add an additional 20 billion rand
for collections in the 25
26 year compounded over three years
this is 60 billion rand in additional taxes
that SARS is taking
and that money could have been used is to
grow the economy and people don't notice it
and people don't notice it
and and the problem is
what's happening now is when it happens one year
it's a couple of percent when it happens two
three years in a row suddenly their net pay is down 15
20% it it's a compound effect
and if they don't do it in the 2627 tax year
then people are really gonna notice
cause they're gonna move into higher tax brackets
and it's something that should stop
because then
the increases should be in line with inflation
yes if inflation is 5%
then sources should adjust their tables
and this this also includes medical credits
they haven't increased for number of years
primary rebates they haven't increased
the the interest on on interest on exemptions
they haven't increased
all this is doing is to create more taxes
for the government exactly
okay thank you so much
thank you Wayne for that insight
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