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Johannesburg - Despite student protests outside parliament, Finance Minister Nhlanhla Nene released the medium-term budget policy statement on Wednesday. Here are some points worth highlighting:
Not unexpectedly, there is a shortfall in tax collection this year of R7.3bn – the national treasury now expects to collect R35bn less from tax over the next three years than originally planned.
However this is from lower corporate tax and value-added tax (VAT) collections – personal income tax collections exceeded expectations by R2.1bn.
Given this shortfall in tax revenue, we can expect more taxes in the 2016-2017 budget. There was direct reference to VAT, although Nene was clear that a final decision had not been made. He also alluded to a wealth tax.
Given the protests around university fees, would the government have the stomach to hike VAT? It’s less likely that wealthy taxpayers would march on parliament!
There was a great deal of emphasis in both Nene’s speech, the policy statement itself, as well as the press conference, on the public wage settlement agreement of 10.1% – double the inflation rate.
This is R12bn more than was budgeted for and needs to be taken from other spending priorities. This also means there is no money for new government jobs. R12bn would go a long way to subsidising university fees – just saying.
Economic growth has been revised downwards, again, to 1.5% this year and 1.7% next year. In February this was expected to be 2% and 2.4% for 2016. We can’t grow jobs at this rate.
The government’s total debt will increase by R600bn over the next three years to reach R2.4 trillion in 2018-2019.
Surprisingly the budget deficit has come in lower than expected, at 3.8% of GDP, and is expected to fall to 3% over the next three years.
This is due to underspending by some departments and cost savings. The amount spent by government on entertainment and catering decreased by 47%.
There is still no clarity on retirement reform – it seems that government is still in negotiations with labour so it’s unclear whether the March 2016 deadline to implement the changes is still on the table.
» To read more from personal finance journalist Maya Fisher-French, visit www.mayaonmoney.co.za
» This story is also available on the Maya on Money website. Read it here.
