According to a senior economist, finance minister Pravin Gordhan might be playing Robin Hood this year.
Elbi Dippenaar
MBOMBELA – Some relief awaits the majority of tax payers this financial year. The tax experts at KPMG explained the good news to attendees of its annual budget breakfast session last week.
It took place at Emnotweni last Thursday, the morning after finance minister, Mr Pravin Gordhan, announced his budget for the 2017/18 financial year.
KPMG employees hosted the networking breakfast with a turnout of more than 150 guests, representing around 100 businesses. It offered businesses the opportunity to better understand the budget implications from the financial experts and rub shoulders with new contacts over a meal.
Upon guests’ arrival, they each received a random number, according to which they had to sit, forcing them to move in different circles than they normally would, and meet new people. The well-prepared KPMG tax directors and senior economist gave an informative presentation.
“This year’s budget review sets out our point of departure: To achieve the vision of the Constitution, South Africa needs transformation that opens a path to inclusive economic growth and development. Transformation without economic growth would be narrow and unsustainable. Growth without transformation would only reinforce the inequitable patterns of wealth inherited from the past,” Gordhan said in his speech.
First of all, the reality South Africans is experiencing is uncertain, according to Mr Joubert Botha, a tax director.
“We live in a time when the top 20 per cent are in demand for their skills and receive pay raises, the bottom 20 per cent receive social grants, and those in the middle are left behind. This accounts for uneven growth,” he stated.
He stated that 95 per cent of the wealth is owned by 10 per cent of the population, and 35 per cent of the labour force is unemployed. More than half of the children in grade five cannot read properly in any language, and more than half of school leavers that enter the labour market, do so without a matric certificate.
Only 25 per cent of them will find employment in the next five years. South Africa’s economic growth of only one per cent per year in real per capita terms over 25 years, puts its growth way below that of other BRICS (Brazil, Russia, India, China and South Africa) trade partners.
Economist, Ms Jeaunes Viljoen, explained that power words such as growth, tax and transformation were used often in the speech, suggesting that that was the key approach the minister will be focusing on.
She suggested that Gordhan might be playing Robin Hood this year, as the top income earners are paying R24 for every R0,18 the lowest earners pay in taxes.
The top one per cent of companies which earn above R100 million per year, pay 64 per cent of the corporate income tax, and 75 per cent of all the businesses in the country pay no tax as they earn less than the lowest tax bracket.
Mr Vian Strydom, another tax director, explained how lowering income tax for all individuals earning below R1,5 million per year, will provide relief to the country. The deficit can be replenished by those above R2 million, as raising their tax by just below R20 000 per year.
International taxes and other interesting tax facts from SARS were also discussed during the breakfast, as the entirety of the informative presentation kept attendees at the edge of their seats for most of the morning.
