Finance Minister Pravin Gordhan’s first comeback National Budget tabled on Wednesday afternoon in Parliament was relatively calm and workmanlike after all the expectations of tax hikes and spending cuts amid tough economic times.
He stressed the need to reaffirm government’s commitment to close the gap between spending and revenue, implementing a plan for stronger economic growth and cooperation between government and the business sector. That should keep the rating agencies that want to downgrade SA’s debt position to junk status temporarily at bay.
Personal income tax rates were not increased as was expected and as Nhlanhla Nene did last year, although about R18bn more will be collected in 2016/17. This will mostly be through yet another big increase of 30 cents per litre in the fuel levy as well as increases in capital gains tax, property transfer tax and an increase of about 7% in the usual sin taxes (alcohol and tobacco).
A new tyre levy and a tax on sugar intake (only next year on sweetened beverages) will also be introduced.
The expenditure ceiling was also cut by R25bn over the next three years to bring the budget deficit down to 2.4% of gross domestic product by 2018/19, and to stabilise debt as percentage of GDP around 45% of GDP.
The public sector wage bill will be cut, but provision for contingencies like drought relief and additional spending has been made and increases in expenditure on for example on higher education and small business development continue. Gordhan stressed that the government would not burden South Africans with “austerity measures”, and that social grants will also be raised.
A full copy of the ministers speech can be found here