Cape Town - At 14:00 today (Wednesday) all eyes will be on Finance Minister Pravin Gordhan as he delivers his budget speech. The 2013 fiscal year has been a challenging one for government and indeed South Africa as a whole.
According to PwC director Charles de Wet, the country experienced slow economic growth, increasing rates of unemployment and South Africans were reminded that government spending has exceeded revenue since 2008.
That already sounds bad enough; however, these were not the only challenges faced by the government and South Africa during the year.
Add to the above challenges the implementation of the Employment Tax Incentive Act, the implementation of e-tolls, the weakening rand, the dip in investor confidence and the increase in the repo rate to curb inflation and it becomes evident just how challenging 2013 has been.
All attention will be on what the finance minister has to say in his 2014 budget speech in respect of how he intends to address the challenges that the country faces. This budget is also being delivered in an election year, the fifth democratic elections since 1994.
Ask just about every person in South Africa and they have an opinion how things could be fixed.
"However, the majority of these solutions are based on a perfect world model and the solutions or part of the solution to the challenges are always more complex," said De Wet.
He said the current world economic situation and unique challenges within South Africa imply that the suggested solutions to these problems need to be very carefully balanced.
"Of course people will not listen to the 2014 budget speech purely to hear how these challenges are addressed. People will also listen for budget allocations and any changes on taxes."
This will include those taxes South Africans have almost become accustomed to increasing every year and never seem to make too much noise about, for example the ever-increasing sin taxes (excise duties), fuel levy and contribution to the road accident fund.
"As with any budget, there is always the possibility of some completely new tax like a dreaded wealth tax or the increase of the maximum marginal rate; however, this year we don’t foresee any dramatic changes in this regard," said De Wet.
"As always there is likely to be a slight reduction in tax rates, especially for the lower to middle income brackets, by a small increase in the primary rebates and an adjustment to the existing table to take account of the impacts of inflation or so called fiscal drag."
While it is very unlikely that there will be an increase in the current VAT rate of 14%, an increase of one percentage point will go a long way to balancing the budget, said De Wet.
"This rate of 14% came into effect in 1993 and we are the only country in the world that has managed to keep their VAT rate at the same level for that period (in excess of 20 years) of time. Also considering that it world terms, the rate of 14% is quite low with the global average closer to 17.5%, an increase in this rate should be something that should be high on the agenda."
In summary thus, from a tax perspective, it is unlikely that significant changes will be announced, but "as always there will be some pronouncements on tax, even if it is just the current activity of the Davis Committee on Tax Reform or the area where Sars (the South African Revenue Service) will be focusing in the next year".
According to PwC director Charles de Wet, the country experienced slow economic growth, increasing rates of unemployment and South Africans were reminded that government spending has exceeded revenue since 2008.
That already sounds bad enough; however, these were not the only challenges faced by the government and South Africa during the year.
Add to the above challenges the implementation of the Employment Tax Incentive Act, the implementation of e-tolls, the weakening rand, the dip in investor confidence and the increase in the repo rate to curb inflation and it becomes evident just how challenging 2013 has been.
All attention will be on what the finance minister has to say in his 2014 budget speech in respect of how he intends to address the challenges that the country faces. This budget is also being delivered in an election year, the fifth democratic elections since 1994.
Ask just about every person in South Africa and they have an opinion how things could be fixed.
"However, the majority of these solutions are based on a perfect world model and the solutions or part of the solution to the challenges are always more complex," said De Wet.
He said the current world economic situation and unique challenges within South Africa imply that the suggested solutions to these problems need to be very carefully balanced.
"Of course people will not listen to the 2014 budget speech purely to hear how these challenges are addressed. People will also listen for budget allocations and any changes on taxes."
This will include those taxes South Africans have almost become accustomed to increasing every year and never seem to make too much noise about, for example the ever-increasing sin taxes (excise duties), fuel levy and contribution to the road accident fund.
"As with any budget, there is always the possibility of some completely new tax like a dreaded wealth tax or the increase of the maximum marginal rate; however, this year we don’t foresee any dramatic changes in this regard," said De Wet.
"As always there is likely to be a slight reduction in tax rates, especially for the lower to middle income brackets, by a small increase in the primary rebates and an adjustment to the existing table to take account of the impacts of inflation or so called fiscal drag."
While it is very unlikely that there will be an increase in the current VAT rate of 14%, an increase of one percentage point will go a long way to balancing the budget, said De Wet.
"This rate of 14% came into effect in 1993 and we are the only country in the world that has managed to keep their VAT rate at the same level for that period (in excess of 20 years) of time. Also considering that it world terms, the rate of 14% is quite low with the global average closer to 17.5%, an increase in this rate should be something that should be high on the agenda."
In summary thus, from a tax perspective, it is unlikely that significant changes will be announced, but "as always there will be some pronouncements on tax, even if it is just the current activity of the Davis Committee on Tax Reform or the area where Sars (the South African Revenue Service) will be focusing in the next year".