Brace for budget that will hurt

With all the politicking at the moment, South Africans have probably forgotten that the budget is coming up later this month.

And it promises pain for many of us. The government revealed late last year that it has to plug a R50 billion hole in the country’s finances – that being the shortfall in predicted income.

Since then, President Jacob Zuma announced free tertiary education and the water crisis in the Western Cape worsened … and both of these cause additional expenditure which will have to come out of the public purse.

There are few options open to the authorities. Increasing Value Added Tax (VAT) by just one percent would bring in immediately an extra R22 billion.

That would hurt the poor.

To do that would be a dangerous political move for the ANC government. Other options include increasing income tax for individuals and companies … but this would make us some of the highest taxed people in the world and would discourage investment, both local and foreign.

Not only that, but the tax base is extremely thin compared to the overall size of the population.

Perhaps there might be some one-off levies – for the drought or for education. No matter the decision, it’s going to hurt.

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