‘Raise taxes, allow growth’

SA’s new leadership will need to be prudent and creative in managing the economy to avoid a credit rating downgrade, by raising taxes without suffocating a chance for growth, a Reuters poll found.

Taken between February 9 and 14 in the days before Zuma stepped down, the poll published yesterday concluded Pretoria was likely to dodge a downgrade in a review by ratings agency Moody’s due next month.

“If people believe it’s a Cyril Ramaphosa budget, I think they can just get away with it,” said Gina Schoeman, economist at Citi.

Parliament elected Ramaphosa as the new president yesterday.

Moody’s said in December that Ramaphosa’s election as ANC leader opened up tentative prospects of a policy shift and rise in business confidence.

The poll suggested Treasury will need to weigh its options on raising tax revenue very carefully before implementing the budget, due on February 21.

Economists were split on how new revenues should be raised – the most popular being an increase in income taxes, followed by higher VAT, the sale of non-core assets and taxes on specific goods.

Economists said a 2% VAT hike could be effective in wiping out the R50.8 billion revenue shortfall announced for the previous financial year in October.

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