BIG BUD­GET HEADACHE

Fi­nance min­is­ter faces raft of chal­lenges on bal­anc­ing his spend­ing plan amid un­cer­tainty over his future

The New Age (Free State) - - INSIDE - BERNARD SATHEKGE bernards@the­newage.co.za

Many is­sues fac­ing Malusi Gi­gaba

MALUSI Gi­gaba, the Fi­nance Min­is­ter, could likely have at least two press­ing is­sues on his mind.

First, bud­get day is loom­ing and Gi­gaba will be do­ing his best to make as good an im­pres­sion on a watch­ing world as he can on Wed­nes­day af­ter­noon, with very lit­tle to work with.

The sec­ond is­sue is his future. Like many Cabi­net min­is­ters, he will be anx­ious to shake off any ves­tiges of the Zuma regime and em­brace the new Ramaphosa era.

If Pres­i­dent Ja­cob Zuma is ousted in a par­lia­men­tary vote of no con­fi­dence to­day or in the next few days, Gi­gaba and all the other Cabi­net min­is­ters and deputy min­is­ters will have to re­sign. Whether he will get his job back is an open ques­tion, de­spite his endorsement on in­ter­na­tional TV of a quick “Zexit”.

The far big­ger is­sue for the coun­try is the huge chal­lenge he has in bal­anc­ing the bud­get.

Eu­gene du Plessis, tax di­rec­tor of Grant Thornton, said yes­ter­day the Trea­sury had never be­fore had such a big chal­lenge, with the fund­ing gap now al­most R60bn and very lit­tle in the cup­board.

“Gi­gaba may be left with lit­tle choice but to squeeze the trusty golden goose (the rich) even fur­ther.

“An in­crease in the VAT rate may be the eas­i­est way for the gov­ern­ment to find the money it so des­per­ately needs but there will prob­a­bly be scant ap­petite to go this route, given the im­pact on the poor. In­stead, the big­gest changes will likely af­fect the higher-in­come tax­pay­ers,” Du Plessis said.

Cal­cu­la­tions are that a one per­cent­age point in­crease in VAT to 15% will rake in about R22bn.

He said the gov­ern­ment’s li­a­bil­i­ties in­clude a big­ger in­ter­est rate bill on its sov­er­eign debt fol­low­ing down­grades suf­fered over the past year, as well as the cost of free ter­tiary ed­u­ca­tion.

The big­ger than an­tic­i­pated pro­jected rev­enue short­fall of R60bn an­nounced in last year’s medium-term bud­get pol­icy state­ment (mini bud­get) has made the Trea­sury’s task in­fin­itely more dif­fi­cult.

Du Plessis be­lieves that while a pos­si­ble in­crease in the VAT rate has been touted in the past and es­pe­cially this year as a so­lu­tion to the rev­enue quan- dary, it will likely not be con­sid­ered in these cir­cum­stances, due to the ef­fect it will have on the poor.

“As a re­sult, the bur­den will likely fall on the small gag­gle of golden geese that, although al­ready squeezed, still have a bit more to give.

“Un­for­tu­nately for the wealth­ier, the big­gest changes in the bud­get will prob­a­bly af­fect them the most in the form of higher in­come taxes, as well as less re­lief from bracket creep,” he said.

South Africa has three forms of wealth tax: es­tate duty, trans­fer duty and do­na­tions tax. These bring in only 1% of tax rev­enue. A wealth tax, as op­posed to an in­come tax, is based on the mar­ket value of as­sets and could be worth less than R5bn a year in terms of tax in­come.

Azar Jam­mine, chief econ­o­mist of Econometrix, told The New Age Gi­gaba was likely to find him­self un­der pres­sure in try­ing to bal­ance his books.

“Al­ready, Gi­gaba is mov­ing to please the new ANC lead­er­ship in a bid to pro­tect him­self.

“This is a tough sit­u­a­tion for Gi­gaba who has been seen as a close ally of Zuma,” he said.

PIC­TURE: GETTY IM­AGES

EYE ON THE BOOKS: Fi­nance Min­is­ter Malusi Gi­gaba has to grap­ple with the mas­sive rev­enue short­fall.

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