The SA economy is projected to expand by more than four per cent over each of the next three years.

Manuel announced surprise cuts in taxes for companies and individuals, after stronger growth boosted revenues more than 11 billion rand above previous estimates.

South Africa also announced that proposed mining royalties will in future be based on sales rather than profits.

A new draft royalty law will be published during the first half of this year, Manuel said.

Mining firms have been lobbying for the royalty to be based on profits, saying a royalty on sales will hurt less-profitable mines and will have a heavy impact during a mine's start-up phase.

Following are the highlights of the 2005-06 SA budget; * Budget deficit estimates revised down to 2,3 per cent of GDP in 2004-05, 3,1 per cent in 2005-06, 3,0 per cent in 2006-07 and 2,7 per cent in 2007-08 * Annual increase in targeted inflation rate seen at average 4,0 per cent in 2005, 5,1 per cent in 2006 and 5,4 per cent in 2007.

* From April 1, the maximum old age grants increase by R40, to R780 a month; foster care grants by R30, to R560; and the child support grant by R10, to R180 a month.

* Corporate tax to be cut by 1 percentage point to 29 per cent.

* Personal income tax cuts amount to R6,8 billion.

* Income tax threshold - below which no tax is payable - is raised from R32 222 to R35 000, and for taxpayers over 65 from R50 000 to R60 000.

* Tax on beer raised by 11 cents per 750ml bottle * Duty on tobacco products increases by between 7 and 15 per cent.

* R6 billion more for land reform over three years.

* Interest income exemption for individuals raised from R11 000 to R15 000, and for those over 65 from R16 000 to R22 000 * Tax relief of R1,4 billion targeted at small businesses to encourage growth and investment.

* Tax rate for South African branches or agencies of a foreign company, and for an employment agency, cut to 34 per cent from 35 per cent.

* Rate for non-mining income falls to 37 per cent from 38 per cent.

* Tax-free allowance for two-thirds of medical scheme contribution replaced by capped tax deduction to make medical aid more affordable from March 2006.

* Motor vehicle value for car allowance capped at 360 000 rand.

Monthly taxable value of company car increased to 2,5 per cent from 1,8 per cent from March 2006.

* General fuel levy on petrol and diesel rises by five cents a litre to 116 cents and 100 cents respectively.

- Nampa-Reuters-AFP-Sapa

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