Cape Town - Working South Africans will have to fork out more for the government from next year. This is clear from the rather tough mini budget tabled in parliament by Finance Minister Nhlanhla Nene.
Nene named increases in state revenue as one of the three pillars of building a more sustainable foundation for public finances – the other two are a lower state spending ceiling, and reducing the government consumption spending programme (including a curb on civil servants’ salary bill).
Nene had little choice but to tighten matters amid disappointing growth and growing state debt.
But the details of tax increases will only be known in next February’s budget. The Medium Term Budget Policy Statement (MTBPS) states that the Davis Tax Committee will inform proposals that will be tabled with the 2015 Budget in February. It mentions policy and administrative reforms that will raise at least R12bn more in 2015/16 and R17bn more in 2017/18.
Although nothing is said about which taxes might be raised, personal income tax forms the bulk of government revenue and one can expect that individuals will pay more tax on their income. VAT remains a politically sensitive issue and one will have to see if Nene has the political influence to raise that.
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The MTBPS further states that the tax proposals will balance several policy objectives. “These include enhancing the progressive character of the fiscal system, improving tax efficiency and realising a structural improvement in revenue. The short- and long-term implications for economic growth and job creation will be a key concentration.
“Government acknowledges that the proposed measures may have a dampening effect on economic growth in the short term, but they are essential to sustain investment and revive growth.
“By acting now we can… rebuild fiscal space. From this stable base, the expansion of social budgets and public investment can proceed in line with long-term economic growth," the statement said.
The aim is to open a new period of investment-led economic growth, in combination with structural reforms already under way.
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Nene named increases in state revenue as one of the three pillars of building a more sustainable foundation for public finances – the other two are a lower state spending ceiling, and reducing the government consumption spending programme (including a curb on civil servants’ salary bill).
Nene had little choice but to tighten matters amid disappointing growth and growing state debt.
But the details of tax increases will only be known in next February’s budget. The Medium Term Budget Policy Statement (MTBPS) states that the Davis Tax Committee will inform proposals that will be tabled with the 2015 Budget in February. It mentions policy and administrative reforms that will raise at least R12bn more in 2015/16 and R17bn more in 2017/18.
Although nothing is said about which taxes might be raised, personal income tax forms the bulk of government revenue and one can expect that individuals will pay more tax on their income. VAT remains a politically sensitive issue and one will have to see if Nene has the political influence to raise that.
READ:
Watch out for tax increases, experts warn
Fiscal stimulus can become counter-productive
Prepare to be taxed to save deficit - expert
The MTBPS further states that the tax proposals will balance several policy objectives. “These include enhancing the progressive character of the fiscal system, improving tax efficiency and realising a structural improvement in revenue. The short- and long-term implications for economic growth and job creation will be a key concentration.
“Government acknowledges that the proposed measures may have a dampening effect on economic growth in the short term, but they are essential to sustain investment and revive growth.
“By acting now we can… rebuild fiscal space. From this stable base, the expansion of social budgets and public investment can proceed in line with long-term economic growth," the statement said.
The aim is to open a new period of investment-led economic growth, in combination with structural reforms already under way.
ALSO READ:
Budget in a nutshell
Mini budget - as it happened
- Fin24
* Missed Nhlanhla Nene's maiden mini budget? Visit Fin24's Mini Budget Special for all the news, views and analysis.