Cape Town – Treasury made very little attempt at reigning in government expenditure in Budget 2018, according to David French, tax consulting director at Mazars.
French says while Budget 2018 introduced some real solutions to close the current R48bn revenue gap, not enough is being done about the issue of wasteful spending.
“Expenditure is a problem that SA has been dealing with for a long time. We think it is time to make some more drastic changes to this side of the budget, and we hope to see some more cost-cutting measures being discussed by the time the mini budget comes around in October,” says French.
He adds that Budget 2018 mentions that mid-term capital expenditure has been cut by R85bn, but the fact is that overall spending is still up.
“The argument has been made that government expenditure can stimulate the economy, but SA has been steadily increasing its spending levels for a number of years now, and we haven’t seen it having any positive effect on the country’s economy,” says French.
“Taking into account the impact that this year’s tax increases will have, especially on the lower income classes, it is disappointing to see that Treasury does not try harder to contain its costs.”
On the 1% rise in the VAT rate, French points out that the increase was necessary for Treasury, because it had very few other options left. It is seen as a measure that will close the revenue gap the fastest – projected to bring in an additional R23bn.
In French’s view, measures like the proposed increases in social grants, will do very little to lessen the effect of these increases on SA’s middle-class households, which will be the hardest hit.
At the same time, the increase in the fuel levy, will have a further negative impact on all consumer goods.
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