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Possible tax increase next year: Analyst

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Analysts have been divided on Finance Minister Nhlanhla Nene’s first Medium Term Budget Policy Statement on Wednesday, with some commending the tough stance taken against government spending. Others have expressed concern at the possibility of tax policy changes taking place during the next Budget Speech, which could see South Africans fork out even more on personal tax.

The statement serves as a mid-term insight into how the how the country has progressed financially over the last two quarters, since the last major Budget Speech. Amongst the issues of note is the revision of the country’s financial deficit, which is the difference between revenue earned by government, and what it spends on an annual basis. The minister analyses whether the country is on track with the deficit set at the start of the year.

“That is basically the difference between what it is spending, and what it is earning from tax revenue. That gets relooked to see whether we are on track,” said economist, Yumna Ebrahim.

According to her, Minister Nene had hinted at possible tax changes that could possibly take effect in February. She said there were also some suggestions that VAT may possibly go up, but was skeptical as to whether that would actually take place.

“I doubt it is going to be VAT that is going to go up, because there will be riots. Also VAT is not a progressive way of collecting taxes,” she said.

Instead, the hint was that personal taxes for South Africans would likely be increased; something unlikely to go down well with citizens already forking out massive amounts on tax.

The statement marked the first attempt at a budget speech for Minister Nene, since taking over the position from Pravin Gordhan. Ebrahim said the minister had inherited the post at a difficult time, where revenue was slow and there was still continuous pressure from government for funds to spend.

Despite those circumstances, she applauded Nene’s first attempt, noting that he had been clear and in his objectives and goals for the country. She added that much of what he had addressed, followed on from what former minister Gordhan, had begun to institute.

“He was cutting down on wasteful spending. In that regard, Minister Nene has followed through. I see there is going to be cuts on travel allowances, spending, catering and accommodation etc,” she said.

She also commended the minister for taking the cuts on government spending even further, by saying that financing to vacant government positions would be frozen. This was along with his decision to cut back on government’s use of consultants.

Ebrahim also lauded Nene’s decision to address the National Development Plan (NDP), calling it the ‘blueprint to get the cogs turning on this economy’.

“The NDP target is 5% growth, and you’ll note yesterday that the minister revised the forecast down for this year’s economic growth down to 1,4%,” she noted.

The Medium Term Budget Policy Statement received mixed reviews from the different parties within, with the DA leading the calls for tougher measure to be implemented. However, the ANC has praised Nene’s balance between the needs of the poor and state expenditure. VOC (Mubeen Banderker)

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