Cape Town – South Africans will be watching for a continued focus on cost reduction and the curbing of wasteful expenditure during Finance Minister Nhlanhla Nene’s mini budget on Wednesday, a tax expert explained.
Nazrien Kader, Africa tax lead at Deloitte, told Fin24 on Monday that there will be sympathy for Nene as he builds austerity measures against a massive push by President Jacob Zuma to invest in infrastructure to revitalise a sluggish economy.
Kader questioned whether tax collections for the 2016 fiscal year will come in on target or how much this is expected to deviate from target.
Nene increased income tax for the first time in 20 years in his February budget speech.
“Economists and ‘arm chair’ budget observers tend to agree that 2016 is not going to be the year that tax collections out-strip collection targets,” she said. “This, against a backdrop of declining growth prospects – not just in South Africa but in Africa and the Bric region.
“The profile of tax collections is expected to mirror that of previous years with individuals likely to retain the highest level of contribution, VAT a close second and company taxes, third in line,” said Kader.
"It is expected that the focus will continue to be tax anti-avoidance in the form of measures to counteract tax-base erosion and profit-shifting for companies and wealthy individuals (including the expat community), tax base broadening measures such as limitations on tax incentives and allowances, as well stronger enforcement and policing of existing laws.”
While the mini budget speech signals much about where Treasury is heading with next year’s budget, it will be the rating agents and economists who will take the most out of the speech.
They are growing “curiouser and curiouser about government’s intentions, including the fiscal outlook for the next three years,” said Kader.
“Leadership is indeed tested in times of strife,” she said.