Surprise boost for taxpayer, Moody’s
GOOD NEWS: NO TAX INCREASES DUE TO WEAK OUTLOOK
Economist doubts public sector wage bill cut will happen as unions will oppose it.
South Africa still has to turn the financial situation around as the economy grew by only 0.3% last year, but credit rating agencies might find some good news in the 2020 budget review, economists say.
Finance Minister Tito Mboweni tabled his 2020 budget speech before parliament yesterday. While revenue for 2020-21 is projected to be R1.58 trillion (29.2% of GDP), projected expenditure was at R1.95 trillion, meaning a consolidated budget deficit of R370.5 billion. On the other hand, gross national debt was projected to be higher at R3.56 trillion.
He announced that public servants’ salaries and benefits would be sliced by R160.2 billion in the medium term.
While the aim is to save R37.8 billion in the next financial year, economist Dawie Roodt said: “I don’t think he will be successful. To do that, you need political support and the president to support you. If we don’t get to the R160.2 billion reduction in the wage bill, then the fiscal numbers and debt numbers will be out of the water.”
Mboweni would have to have the support of labour unions as the wage bill cuts would be negotiated.
There were no tax increases due to the weak economic outlook, Mboweni said.
The projected tax revenue for 2019-20 was now R63.3 billion lower than the estimate of the 2019 budget.
But National Treasury expected tax revenue to grow 4.9% in 2020-21 by strengthening the SA Revenue Service (Sars), tax compliance and tackling fraudulent VAT claims. Personal income taxpayers will have some relief. Those earning R10 000 a month will pay 10% less in tax while a R100 000 monthly earner will pay 1.5% less.
However, National Treasury proposed broadening the corporate income tax base. This revenue will be used to reduce the corporate tax rate in the near future to help businesses grow.
While Moody’s might be impressed by the wage bill cut and reforms, economic forecasts have been revised lower, expenditure wasn’t significantly trimmed and the budget deficit has swelled, PriceWaterhouseCoopers chief economist Lullu Krugel said.