The Growing Effect of Income Tax Bracket Creep on Individual Taxpayers in South Africa

The 2024 budget avoided raising income tax rates for the 2024/2025 tax year. Although the government had maintained tax rates, it had not adjusted tax brackets to account for inflation, which could result in the risk of “income tax bracket creep.” When people received inflation-linked salary increases, they were pushed into higher tax brackets, which increased their tax liabilities even when their level of wealth had not increased. It seemed like the middle- and lower-income were disproportionately affected, as the extra tax burden may have diminished their disposable income. Household budgets got tighter and caused savings to decrease and this made economic stagnation worse. The absence of inflation adjustment hindered economic expansion and wealth disparity. The study design was based on a qualitative methodology through literature review. This study explored how income tax bracket creep affects individual taxpayers. This review aimed to understand the financial and social consequences of bracket creep across various income categories by looking at the literature also on the topics of tax policy and household budgeting. The research was guided by the following research question: How did individual taxpayers perceive the effects of income tax bracket creep on their financial well-being particularly among middle- and lower-income earners? The findings were to make a valuable contribution to the ongoing discussion on how the tax authorities should review its tax laws and should take inflation-adjusted thresholds into account to safeguard the financial well-being and the household budgeting of taxpayers who are most in need.