Fiscal balance needed to lure investment
In the last 12 months, Team SA has done remarkably well to ‘hold the centre’
BUSINESS Unity South Africa (Busa) has called for Finance Minister Pravin Gordhan to emphasise the fiscal balance required to facilitate investment and inclusive growth in his budget speech tomorrow.
Busa chief executive Tanya Cohen said yesterday that she advocated a balanced budget that incorporated cost containment measures with sustainable, “and where necessary, limited, yet progressively designed” tax increases.
Consolidation
Cohen said such a Budget was the only way of sustaining government’s long-term pro-poor and pro-growth policies while keeping the economy afloat.
She said the Budget was expected to demonstrate government’s commitment to fiscal consolidation. “Maintaining a balanced Budget requires, in addition to moderate and carefully targeted revenue increases, further efforts towards fiscal consolidation. This includes pursuing greater efficiencies across government departments, as well as cost containment measures, eradicating wasteful and fruitless expenditure and in particular curtailing losses of Stateowned Enterprises (SOEs),” said Cohen.
She said business was “profoundly” concerned about continued loss-making by SoEs and applicable guarantees by the Treasury. In September last year, the Treasury approved a R5 billion guarantee to the embattled national airline, South African Airways.
“We note the commitments made by the government in the 2016 Budget pertaining to improved governance and cost containment on operations in SOEs. We are hopeful that the Budget will give greater effect to these commitments,” said Cohen.
She said Busa expected that revenue increases in order to balance the Budget would be in line with the October 2016 medium-term Budget policy statement. Gordhan is expected to reveal various tax measures to raise R28bn.
“While business recognises that increases in certain taxes are required, the inability to grow the economy inclusively and to create sustainable employment means that such increases need to be kept to a minimum. They should not be extracted in such a way as to deter investment in the economy,” said Cohen.
Busa said it was confident that the Treasury would strike the appropriate balance between fiscal prudence and building on the advances made in social and economic transformation since 1994.
Real issue
“There is a limit to what can be achieved by the Minister of Finance (Gordhan) and through the Budget. The real issue is to ensure our economy grows adequately on an inclusive and sustainable basis. In the last 12 months Team SA has done remarkably well to “hold the centre”, maintain our investment grade rating, and sustain and service government borrowing.
“But more action is needed to pursue a stable, predictable, policy and fiscal environment that stimulates investment. Business is ready to play its part and we are hopeful that the budget will help create an environment where that can be sustainably achieved,” said Busa president Jabu Mabuza.
Ben Bierman, managing director of Business Partners, said yesterday that although Gordhan was expected to raise taxes to balance the Budget, “a strong pro-growth argument can be made to strengthen the main tax incentive for owner-managed businesses with a turnover of less than R20m.
“Known as tax relief for small business corporations, the measure allows small businesses to pay a lower tax rate than the standard 28 percent Companies Tax on their first R550 000 of taxable income. Business owners would also like to see the R20m turnover cut-off increased, as well as the size of the incentive itself.
“At the same time, the Turnover Tax incentive can be strengthened by increasing the qualifying threshold of R1m turnover, and by lowering the tax rate that qualifying micro businesses pay on their turnover even further,” said Bierman.