Nene’s budget set to hit taxpayers’ pockets
Economists predict rises in personal tax, wealth tax, fuel levy, and VAT
THE ELECTRICITY crisis and a weak economy will make Finance Minister Nhlanhla Nene’s Budget Speech next week an interesting balancing act, with the possibility of an increase in taxes, leading analysts have warned.
Nene will present his national budget speech to Parliament on Wednesday.
Anthea Scholtz, tax partner at Deloitte, said President Jacob Zuma and Nene, in his medium-term budget policy statement last year, set out an ambitious expenditure mandate for South Africa.
“In the medium-term budget policy statement it was noted that government will spend R4.4 trillion over the next three years. The main source of funding for this expenditure will, as always, be tax revenues.”
Slight hints were also given as to “how” and “where from” these tax revenues would be generated. She added while Nene did not specifically state the source of the revenue, he did indicate that the recommendations of the Davis Tax Committee would inform the tax proposals and would balance several objectives.
Scholtz said these included enhancing the progressive character of the fiscal system, improving tax efficiency and realising structural improvement in revenue.
She said over the past few years, tax collections had increased from R598.7 billion in 2009/10 to R900bn in 2013/14, of which 34.4 percent came from personal income tax.
Employment tax incentive could also significantly contribute to the broadening of the tax base through additional revenue, provided that jobs could be sustained for a reasonable period.
David Crosoer, executive of research and investments at PPS Investments, said South Africans would need to prepare for a challenging year.
It was likely to be characterised by volatility as the world readjusted to increasing US interest rates. The budget could also hit consumers in the pocket.
“Eskom load shedding is also a major constraint and will make it difficult for our growth to top 2 percent in 2015, even if other things work in our favour. This is likely to be a challenging year for South Africans from a number of perspectives.”
Rob Cooper, tax expert and director of legislation updates and proposed legislation at Sage VIP Payroll and HR, said the state of the economy and government finances left the minister with limited room for financial manoeuvre.
“That could translate into some interesting moves that may affect South African payrolls and employees. What he says or doesn’t say about these topics will be enlightening.”
Cooper said he would be looking out for three things: the National Health Insurance, retirement reform and the national minimum wage.
Dawie Roodt, chief economist at the Effi- cient Group, said the economy was not performing well and Nene would not be able to collect as much tax as he would have liked.
Debt levels were also at a record high. “The reality is that there is no more fiscal space. Nene must increase taxes or reduce spending. I think he will increase taxes. I also think there will be an increase in the socalled wealth taxes.”
Roodt said there was a good chance of the fuel levy being increased by quite a large margin, VAT being increased, and then therewas also the issue of civil servants demanding a 15 percent increase in salary.