A one per cent decrease in corporate taxes will go a long way in encouraging investment and small business establishment, particularly after the July unrest which compromised the financial health of businesses.
This is according to economist at the University of Zululand, Dr Brian Mazorodze.
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Mazorodze was commenting after the 2022 Budget Speech delivered by Finance Minister Enoch Godongwana on Wednesday afternoon.
Godongwana said the corporate income tax rate will be reduced from 28 to 27%, ‘for companies with years of assessment ending on or after 31 March 2023.’
Mazorodze said this could have, however, been accompanied by directed credit for firms particularly in the tourism and manufacturing industries.
‘The former suffered severely from the announcement of the Omicron Covid-19 variant late last year, while the latter is generally labour-intensive and therefore capable of reducing the country’s high unemployment rate,’ he said.
He further welcomed the minister’s decision to keep taxes, particularly VAT, unchanged.
‘It is commendable in so far as it provides relief to consumers who have seen their real incomes eroded by rising prices.
‘However, a more direct and perhaps complementary approach would have been efforts to confront inflation directly as an attempt to raise the real incomes for our vulnerable people.
‘Such efforts could have been a fiscal intervention to tame down a pass through effect of costs in terms of financial support to those industries that have seen their cost of production rise on account of rising external oil prices,’ said Mazorodze.
Government’s ‘reluctance to continue bailing out Eskom’ was also commended.
‘Eskom needs to find cost-effective ways of operating without harming the economy’s medium term growth prospects,’ he said.
For more detail, see this week’s ZO Weekender edition
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