Tax hike will hit where it hurts

Although Finance Minister Enoch Godongwana’s Budget 2024 contained no shocks for ordinary people, the grim prospects for economic growth and fears that there could be more financial pain after the elections has some people saying South Africans are about to be even poorer.

In his budget speech, Godongwana said government “is mindful” of the high cost of living – and consumers should heave a sigh of relief to hear the news was not as bad as they thought it would be.

ALSO READ: Taxes will have to go up after elections – expert

He had already announced there would not be an increase in personal income tax or VAT.

There were also no increases in the fuel levy, although, as expected, smokers and drinkers will have to pay more for their “sins” through increased excise duties.

Yet, the standstill on personal income, where the tax brackets were not adjusted upwards in line with inflation of just over five percent, means taxpayers are going backwards in real terms.

This will impact more on middle-class earners who pay for medical aid because, as with the tax bracket freeze, there would be no change to the medical aid allowance of R364 per month for the first two members and an additional R246 for each dependent.

Taxpayer pain would translate to an additional R15 billion in revenue, Godongwana said.

There was also little done to reduce joblessness, which dropped by 22 000 in the last quarter of 2023, raising the official unemployment rate by 0.2 of a percentage to 32.1%, according to statistics released this week.

Even the government’s macroeconomic outlook was gloomy, despite Godongwana’s attempts to put a positive spin on moves to improve SA’s financial position.

ALSO READ: Budget 2024: a bottle of whiskey will cost you almost R6 more, vapes R3 more

A detailed breakdown of the budget shows SA’s 2023 gross domestic product growth estimate had been revised down to 0.6% due to widespread power cuts, operational and maintenance failures in freight rail and at ports, and high living costs.

Government analysis admitted the rate of economic growth was “insufficient to address high levels of unemployment and poverty”.

“The reality for young South Africans and experts is the concern that, being an election year, there was some apprehension about the minister tabling an election budget, rather than one that tackles South Africa’s problems head-on,” it said.

Unemployed graduate Thapelo Maja said what seemed like a “somewhat balanced budget” could mean South Africans will be poorer by the time the minister delivers his medium-term budget policy statement (MTBPS), when there could be a serious tax hike.

Maja said one cannot help but ask what will happen after the elections? Economist Nyiko Hlongwane said the budget was likely a “political stunt by the ANC to lure votes by not increasing taxes.

ALSO READ: Opposition parties slam Godongwana’s budget

However, it was worth noting the minister increased alcohol products excise duties by between 6.7 and 7.2%. He said it was also imperative to note that it was not the best time to increase taxes due to the current economic landscape engulfed with low economic growth.

“High inflation, above the inflation target, high unemployment and inequality, so if the ANC wins elections we’re likely to face tax hikes.”

Political analyst Dr Thandiwe Ngcobo said although a tax hike was likely after the elections, there were a number of factors to consider.

“In last year’s MTBPS, government prioritised working towards a careful balance between supporting a growth-enhancing agenda and stabilising public finances, while maintaining support for the most vulnerable.

“This included targeted revisions to spending that included additional allocations to labour-intensive sectors to support implementation of the 2023 public service wage agreement.”

Relief or electioneering?

• Anything that has the potential to bring a positive balance to the households, to the workers, “is actually going to be looked into in the context of electioneering”, says political analyst Dr Bernard Sebake.

• “But an alternative point of view is that it shows the government also recognises the economy is stagnant and the pressure that will be on the pocket of the working class.

• “You ought to also bring a relief to them so they are able to afford their communities from time to time.”