Pain looming for taxpayers as Gigaba scrambles to fill Treasury’s coffers

South Africa’s taxpayers look to be even more out of pocket as National Treasury scrambles to fill its coffers. On Wednesday, eloquent Finance Minister Malusi Gigaba left out the fine print of how he intended to raise the money.

However, in a presentation on the National Treasury website, it’s stated “stabilising gross debt below 60% of GDP [gross domestic product] over the coming decade will require spending cuts or tax hikes amounting to 0.8% of GDP.”

Gigaba demonstrated his willingness to implement spending cuts by bailing out the South African Airways yet again (R10 billion in 2017), stating on Wednesday government was “convinced that retaining a national carrier is in the public interest”.

This is where government side-eyed taxpayers in the presentation.

In 2018-19, the presentation stated, 0.8% of GDP would amount to R40 billion, which would go a long way to reducing the R50.8 billion needed to fill Treasury coffers in order for it to fulfil its societal obligations in terms of the National Development Plan.

“Raising VAT will give an instant response and if that was increased by 1%, that will give us about R21 billion in one year which will go a long way to off-setting the deficit,” said Faith Ngwenya of the South African Institute of Professional Accountants.

“The problem with an increase in VAT is if it was going to be a 1% increase across the board, it’s going to impact on everyone and will lead to a further downward pull on the economy. A VAT increase will require a serious relook of our exempt and zero rated items.”

Ngwenya said raising personal income tax would not add much to the fiscus. The problem was South Africa’s tax base was being reduced by growing unemployment.

“The very small percentage of people who earn above R1.5 million and above a year are already paying 45% tax, so this is another no-go area.”

“I feel the minister could have spoken more to wasteful expenditure and nonperforming state owned entities (SOEs), which are draining the economy rather than contributing to it.

“Private entities in the same area of operation as the SOEs are thriving but our SOEs are always running to the principal shareholder for a bailout. I do not hear him taking decisive steps to stop that. As a parent, you sometimes have to give tough love,” Ngwenya said.

Cas Coovadia of Banking Association South Africa said South Africa needed decisive and considered leadership, willing to take the decisions needed to ensure the interests of all South Africans are protected.

“A huge gap exists between the minister’s rhetoric and the macroeconomic indicators which point to a worsening situation,” Coovadia said in a statement.

He alleged the budget was prepared in accordance with a mandate paper by the department of planning, monitoring and evaluation.

“No one in broader society has had sight of this paper,” said Coovadia. – amandaw@citizen.co.za

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