Three guaranteed expenses for Budget 2017

2017-02-15 20:05 - Lameez Omarjee

Johannesburg – Current estimates of the budget deficit come to R28bn, and Finance Minister Pravin Gordhan will share how he intends to raise this additional revenue when he announces the National Budget on February 22.

Gordhan will also lay out plans for government expenditure in the year ahead. Tax experts from Norton Rose Fulbright shared insights on where the minister is likely to direct expenditure.

According to Dale Cridlan, director of tax, Gordhan would probably address National Health Insurance, the nuclear build programme and the Fees Must Fall movement.

National Health Insurance (NHI)

NHI has been on the agenda since 2011. In December 2015 a white paper was issued containing a “shopping list” of how government would likely fund NHI.

“An additional R375bn is required to fund the NHI over the next eight years until 2025,” said Cridlan.

There are three options government has to fund the NHI, so far there is no clarity on which one government will use, added Cridlan. It could be in the form of payroll tax, this would work similarly to the Unemployment Insurance Fund (UIF) deductions from the employee’s salary. The amount to be deducted is still to be determined, he said.

A surcharge could be introduced in addition to the marginal tax rate on incomes. This could be an additional 5%. Government could also look at increasing the VAT rate by 1%. The revenue generated through VAT could go towards NHI, he added.

READ: NHI will have some losers and winners

Gordhan may just reiterate government’s commitment to NHI. There is unlikely to be “dramatic announcements” pertaining to it. An NHI Finance Paper is still due for release which will clarify this.

During the State of the Nation Address (SONA), President Jacob Zuma added that the NHI, to be implemented in three phases over a 14-year period, is currently in its first phase which started in 2012.

Nuclear build programme

Nuclear is still an area government wants to focus on, said Cridlan. Zuma briefly mentioned nuclear energy during SONA and reaffirmed commitment to renewable energy programmes.

About 27 companies have so far expressed interest in Eskom’s procurement programme.  

“Projected spend on that depends on exchange rates and cost of funding,” said Cridlan.

This is estimated to be along the lines of R1trn. Cridlan highlighted that budget revenue collection in 2016 came to R1trn.

Treasury might make a commitment to the nuclear build programme and it may have an effect on the next year’s fiscus.

Fees must fall

There has been a lot of pressure on tertiary institutions, said Cridlan. The protest in 2015 culminated in a 0% increase in fees in 2016.

Government has committed to support students entering institutions, or first-year students. Gordhan will clarify how this will work, if not mentioned in the budget, Higher Education and Training Minister Blade Nzimande would outline the details. 

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