South Africa 27.10.2016 07:53 pm

Tax hike a possibility to maintain stability

Finance Minister Pravin Gordhan delivering his 2016 Mid Term Budget Speech in Parliament, Cape Town.26/10/2016 gcis

Finance Minister Pravin Gordhan delivering his 2016 Mid Term Budget Speech in Parliament, Cape Town.26/10/2016 gcis

This was a matter of ensuring that government expenditure was allocated accordingly and acutely spent.

In all likelihood government is set to hike up taxes to keep the country financially sustainable in the continuing domestic and global economy.

This means households already suffering under monetary strain will have to dig deeper into possibly empty pockets.

And while the medium-term monetary budget policy statement does not talk to tax measures specifically it does make mention of a proposal of an increase of R13 billion.

Finance Minister Pravin Gordhan said however yesterday [Thursday] that while the country had to bounce back economically amid a struggling global financial situation government would try not to hurt the poor.

“On the service delivery point, let me be very emphatic that as government we are absolutely clear that we have not reached a fiscal point where we need to hurt the poor,” he said.

He said there was still a “lot of room” to make sure poor households could stay afloat and were supported.

It was a matter of ensuring that government expenditure was allocated accordingly and acutely spent. It had to be value for money, Gordhan said.

“We need to often focus our minds not so much on the fact that less money might be going into a particular infrastructure project, but the efficiency with which that money is actually spent,” said Gordhan

But with a downscaled and slow economic growth rate and an increasing burden on households; inequality between the rich and the poor was even more evident.

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Gordhan muted concerns there might be a revolt as taxes would be transparent and would apply to only those who could afford them.

According to the mini-budget, households were spending almost a percent less in the first half of the year, from 1.7% in the same period in 2015.

Growth in real household disposable income, which reached 2.2% in 2015, slowed to an annualised 0.7% in the first half of the year.

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Household net wealth fell to 386% of disposable income in the second quarter of 2016, compared with 391% a year earlier.

Consumer confidence continues to remain low and with higher inflation people’s shopping lists are getting smaller and credit isn’t easy to come by.

In the second quarter of 2016, applications for credit fell by 18%, while the rejection rate remained relatively high at 54%.

 

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