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Gordhan gets tax prods for budget

Feb 21 2012 22:00 Sapa Gordhan asked

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Budget balancing act

 
Cape Town - There is no shortage of advice for Finance Minister Pravin Gordhan as to what he should include when he presents government's 2012 Budget on Wednesday afternoon.

Tax relief for some, a rich tax for the country's top earners, finding alternative funding for tolls and an entire "alternative budget" have all been put forward to the minister.

The Democratic Alliance's "alternative budget for 2012" suggested a shake-up in the ownership of state enterprises.

The party proposed partially privatising state enterprises to boost infrastructure spending to 10% of the national Budget.

DA finance spokesperson Tim Harris said government should follow the example of Brazil, which this month raised some R70bn by privatising operations at its three biggest state-owned airports.

Harris said South Africa's infrastructure drive could be boosted by R55bn a year by partially listing state-owned enterprises and selling off their existing assets and investing the proceeds into build projects.

This would add more than 2% to the 7.8% of the budget Zuma pledged last week to invest in infrastructure, without introducing new taxes or increasing the forecast deficit of 5.2%.

The DA wanted the urgent implementation of Gordhan's plans for a R5bn youth wage subsidy.

"That has to be implemented on the first of April. If the president and the finance minister lack the political clout to push it through, then that is a serious problem for the three-plus million unemployed young people in South Africa today."

The DA proposed reimbursing the private sector for job training, cutting the state's wage bill by limiting salary increases to inflation levels and saving more money by doing away with several national departments, including public works, Harris said.

Pushing through R1 trillion mark

Congress of the People spokesperson Nick Koornhof said all indicators pointed to the budget being more than a trillion rand for the very first time in history.

"The question remains whether government will be able to spend this trillion rand in such a way that we get value for our trillion," he said.

Gordhan should once again stamp his authority and be tough on a stable, consistent fiscal approach. This was vital for South Africa's future credibility and growth potential.

"The minister is facing a difficult balancing act and should not lose his footing."

Among other things, the gross domestic product (GDP)/debt ratio should be monitored very closely, the deficit should remain below 6%, and real plans should be made to shrink the state wage bill under 5% growth per annum for the next five years.

Gordhan should also focus again on inflation targeting, especially against rising food inflation in 2012, Koornhof said.

Political connections

Trade union Solidarity agreed this year's budget was likely to break through the R1 trillion level.

The union wanted, among other things, relief for taxpayers and clear signs of fiscal responsibility.

Solidarity deputy general secretary Dirk Hermann said hardworking South African employees and the owners of small businesses were fed up with being drained of their hard-earned money.

"Too often the money ends up in the pockets of politically connected persons and is frequently misappropriated."

Gordhan should restrict public debt and introduce a general tax reduction, he said.

Rich tax

On the other hand, Mark Weinberg of the Alternative Information Development Centre representing a number of other civil society organisations, urged higher taxes for the rich.

Gordhan should remember that "the wealth of South Africa belongs to all", he said.

"Government must collect taxes and spend money to ensure that everyone lives the life of dignity promised in our constitution."

High income earners should not be given new tax relief. The rich had already been given too many tax breaks.

"The government must stop the yearly routine of giving unnecessary tax relief to the rich. There are no visible political pressures on the government to pursue this policy."

He also wanted government to stop the "almost systemic under-spending".

"They must roll back the years of neo-liberal corporatisation, privatisation, and the resulting under-capacity in the public sector," Weinberg said.

Domino-effect of fuel levy

For its part, the Automobile Association of SA (AA) said the lack of maintenance on roads remained a bone of contention, with arterial routes further deteriorating due to congestion.

"Tolls remain a continuous debate and the hope is that the issue will be reconsidered and an alternative source of funding will be identified - preferably through the fuel levy."

The AA predicted a "guaranteed increase of at least R0.25 per litre as a direct result of the fuel levy and Road Accident Fund contributions".

If Treasury decided to fund the Gauteng Freeway Improvement Plan from the fuel levy, it was likely that the consumer would experience an additional R0.25 to the cost of fuel.

"This increase will likely see freight and public transport costs increase, as will commodities on supermarket shelves - all negative influences on steadily diminishing disposable income of most families," the organisation said.
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