More tax increases are on the way: economist
Fund manager at Ashburton Investments, Wayne McCurrie says that South Africans should expect tax increases soon, as the government needs to fill an additional R40 billion to R50 billion tax hole.
This is a significant amount over and above the extra taxation needed to fill the gap as announced by former finance minister Pravin Gordhan in February 2017, McCurrie said, and will likely negate any relief seen by lower interest rates.
In his budget speech in February, Gordhan said National Treasury had to draw in R28 billion in tax revenue over the next two years.
Analysts said this would most likely be achieved through a fuel levy increase, shifting tax brackets, capital gains and sins taxes, or even an increase in VAT if needs be.
With current finance minister Malusi Gigaba’s ‘mini-budget’ expected in October 2017, it has become clear that National Treasury is in a very difficult position.
Read: How many days you spend working to pay tax every year
Speaking at a tax indaba held on Monday (11 September), Treasury tax analyst Chris Axelson said that the group faced a dilemma in looking for revenue: Cutting spending (like government’s wage bill for example) would put growth and tax revenues under pressure – but if taxes keep getting hiked, people would look for loopholes and other tax evasion techniques, leading to the same result.
Lawmakers are either left to leave the tax deficit deteriorate, or to change big tax items like income tax, corporate tax, VAT, or the fuel levy, Axelson said.
Many tax speakers at the indaba, including Gigaba, alluded to the fact that tax compliance in South Africa was already slipping.
The minister conceded that tax collection problems were directly related to corruption and wasteful expenditure, but appealed to businesses and wealthy individuals to also pay their fair share, and not use “options available to them” to avoid paying tax.
“Tax morality plays a significant role in the success of a country and government recognizes that tax morality is closely linked to the efficient use of resources and a reduction in corruption.
“Government needs to do its part in showing that the taxpayers’ money is used wisely, that efforts are taken to reduce wasteful expenditure and that taxpayers are treated fairly,” Gigaba said.
“Alongside these efforts taxpayers should recognise the importance of their contributions and their behaviour to the functioning of our society.
“We should not have a situation where individuals who can afford to pay for advisors or complicated structures end up paying less tax than those who cannot afford such services,” he said.
Read: Where Gordhan will find R28 billion in additional tax revenue in 2017
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