South African Institute of Taxation (SAIT) CEO, Professor Keith Engel, says that finance minister Enoch Godongwana’s hands are tied – and he can’t “save the day” for South Africa’s low-growth economy.<\/p>\n\n\n\n
This means that anyone hoping for big and groundbreaking changes to come from next week’s budget speech is setting themselves up for disappointment.<\/p>\n\n\n\n
“The problem is the finance minister can only do so much to stimulate growth. Lowering corporate taxes is not going to get any growth – you might get some goodwill, but that’s all,” he said.<\/p>\n\n\n\n
“Incentives have a muted effect, and they’re paltry, like the renewable incentive. They really make no difference whatsoever.”<\/p>\n\n\n\n
“The real issue for growth in this economy lies outside the minister – and that is that we are not privatising fast enough with Transnet and Eskom, and we’re not putting enough into infrastructure.”<\/p>\n\n\n\n
The other area is deregulation, he said. The South African government is committed to heavy regulation, which is slowing down businesses, big and small.<\/p>\n\n\n\n
“The growth factor is outside the minister of finance’s hands; all he can do is balance the budget. The minister can’t save the day for growth. It’s up to the rest of the government – and this comes down to President Cyril Ramaphosa. If he can’t do anything, (Godongwana) can’t save the day.”<\/p>\n\n\n\n
Expected tax changes<\/strong><\/p>\n\n\n\n According to Engel, every year a few weeks before the budget, analysts and taxpayers get worked up into a frenzy about possible tax hikes as the government looks for revenue to plug the budget deficit.<\/p>\n\n\n\n “(The panic) happens every year, and (then) there’s no change,” he said.<\/p>\n\n\n\n “Yes, the budget deficit is not moving in the right direction or at all – and the question is always will the government cut expenses or increase taxes?”<\/p>\n\n\n\n “My feeling, in an election year, is there is a slim to none chance of a tax increase<\/strong> – especially no tax increase around VAT. Politically, that’s death, there’s no way that (Godongwana) is going to do that,” he said.<\/p>\n\n\n\n Engel said that there could be the “usual” increases in sin taxes and other little taxes “here and there”, but in terms of the big taxes, there isn’t much room for anything.<\/p>\n\n\n\n “In terms of personal income tax, there won’t be a rate increase, but if they need to get money, Treasury just won’t adjust them fully for inflation,” Engel said.<\/p>\n\n\n\n However, he noted that this isn’t entirely effective as the government isn’t usually able to get much money this way.<\/p>\n\n\n\n What has been raised as a new concern in 2024, though, is the National Health Insurance scheme.<\/p>\n\n\n\n While Engel agrees with most commentary that the NHI will be subject to litigation and delay – “so we probably won’t see anything” – he did note some risk.<\/p>\n\n\n\n He said there is a risk that if the government gets “excited and passionate about NHI, then they might want to pull back on medical aid credits or eliminate them.”<\/p>\n\n\n\n This is doubtful, he said, but remains a risk, given the political importance of the scheme in an election year – and if the government were to make a move to find extra money to finance it, this would be the first point of contact.<\/p>\n\n\n\n
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