Cape Town – Treasury plans to collect around 80% of its revenue for the 2018/19 tax year from consumers via indirect taxes that affect a larger portion of the South African population, Tertius Troost, tax consultant at Mazars, said in reaction to Finance Minister Malusi Gigaba’s Budget 2018.
Mike Teuchert, national head of taxation at Mazars, added that these so-called “stealth taxes” seem to be Treasury’s only available option.
“It is interesting to note that Treasury seems to be admitting that there has been a marked decline in the collection of personal income taxes. This has in part been attributed to bad economic growth, as well as an apparent increase in tax avoidance by taxpayers,” said Teuchert.
To him this indicates that Treasury has reached the limit to which it can increase personal income taxes. He expects these “stealth taxes” will have a significant impact on consumers.
“The latest round of tax increases are merely short-term solutions. The only way to stabilise SA’s budget is to increase jobs and actually grow the economy, and we are still not seeing enough of that,” said Teuchert.
Balance the pressure
Ruaan Van Eeden, managing director of tax and exchange control at Geneva Management Group, said Budget 2018 was a particularly difficult one, with the need to balance the pressure to secure greater revenue with the desire not to burden the taxpayer too much.
Although Van Eeden found it encouraging that Gigaba mentioned the fact that the personal tax increases in recent times have affected higher income earners significantly, reduced bracket creep adjustments will, in Van Eeden’s view, not provide real relief due to inflation.
“While it is encouraging to note that [Gigaba] spoke with concern about the need to intervene so that the unemployment rate can come down, the National Budget Speech does not include any tangible proposals for how government intends to address this issue,” added Van Eeden.
“It is of huge importance for the future: more people working means more tax revenue through income tax, and this must be the most significant priority for the state.”
This view is shared by Bianca Botes of corporate treasury management at Peregrine Treasury Solutions.
“At the end of the day, the key questions will be whether the budget allocation will stimulate economic growth, and whether there will be enough space left in the budget to ensure that government can meet all the obligations they have set themselves in terms of SOEs and free education,” she said.
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