Mboweni set for a fight with unions over cuts
• Finance minister announced a plan to cut baseline spending by R261bn over three years
Tito Mboweni, who once served as labour minister under Nelson Mandela, has set himself up for a fight with the ANC’s trade union allies by announcing a huge cut to the public-sector wage bill as part of efforts to fix government finances.
In a press conference before he delivered his second budget speech in Cape Town on Wednesday, the finance minister acknowledged as much, saying he was confident that “eventually the government and publicservice workers would find each other”.
The proposed R160bn in savings over three years had to be found “for all our sakes” and there is no point in “being victorious here and there”, he said.
Ahead of what was billed as the country’s most important budget since the advent of democracy, expectations on Mboweni were low, with analysts suggesting he does not have the political capital to push through certain controversial policies.
These include slashing a wage bill that eats up 35c of every rand of government revenue, increasing taxes or reducing expenditure in other areas such as welfare.
Instead, Mboweni, who is in a race to convince Moody’s Investors Service that the government has a plan to contain a budget deficit that is set to rise to 6.8% for 2019/2020, the highest since 1992/1993, according to Bloomberg, announced a plan to cut baseline spending by R261bn over three years.
Finance minister Tito Mboweni has set his sights on religious organisations and leaders who seem to be dodging tax.
“I tweeted about the snakeeating churches. They feed people snakes and grass, and then walk on people and all kinds of crazy things in the name of God ... and then you see them displaying wealth, big cars ... and they are not paying tax ... some of them have private jets, all in the name of God,” Mboweni said at a media briefing in parliament, ahead of his budget speech.
“There are churches mushrooming everywhere and our people make contributions ... and these fellows are not paying tax. They are not registered anywhere. That kind of lawlessness is going to bring this country down ... I know I will get into trouble for saying this,” the minister said.
A 2017 report on the commercialisation of churches by the Commission for the Promotion and Protection of the Rights of Cultural‚ Religious and Linguistic Communities said religion was big business in SA. It recommended that the SA Revenue Service (Sars), in partnership with the commission, conduct an investigation into tax evasion by religious leaders.
The commission also recommended that religious leaders and organisations should be registered and pay tax.
Mboweni explained that there is a particular tax treatment for public benefit organisations that includes churches, but many of the so-called charismatic churches are not complying with the rules.
Sars commissioner Edward Kieswetter said while churches are classified as public benefit organisations, and are thus exempt from paying income tax, they are obliged by law to register their employees, including their pastors, for pay-as-youearn (PAYE) tax.
“Where the abuse takes place is that when they employ anyone, those employees are subject to pay as you earn [PAYE] on their income. They are not exempt from that ... If they are not exempted by Sars, the organisations have to pay VAT on goods and services that they get,” Kieswetter said.
Sars is also concerned that proper taxes on trading activities that are unrelated to religious activities as well as PAYE tax on remuneration and other benefits are not being paid in terms of legislation. Furthermore, said Kieswetter, the salary of the leader of the public benefit organisations, or the pastor, has to go through the normal tax processes, “and cannot, for example, have a car as a benefit that doesn’t reflect as income or a big house or a plane that doesn’t reflect as an income.”
“To the extent that it is donated, it must have a donation’s tax certificate from the person who gives it, so you can’t get out of the tax loop,” the commissioner said.
“We have begun to raise quite a number of assessments through our audit work on [public benefit organisations] and we will step up that work,” Kieswetter said.
Sars has previously stated that religious institutions could apply to the tax authority to be exempted from income tax and other taxes under the Income Tax Act. Once tax exemption status is granted, a number of specific criteria have to be met. These include, among other things, carrying out activities in a manner not aimed at making a profit and with altruistic or philanthropic intent.
The SA Council of Churches has previously stated that bona fide church organisations would have no issues with the normal application of standard tax laws by the authorities.
THEY WALK ON PEOPLE ... AND THEN YOU SEE THEM DISPLAYING WEALTH, BIG CARS ... SOME EVEN HAVE JETS