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Cape Town - A new “super-rate” of personal income tax, a higher fuel levy and a luxury goods tax were possible contributors to higher tax revenue in next week’s National Budget in South Africa, Nomura said on Wednesday.
Peter Attard Montalto, Nomura analyst, wrote: “A new super rate of personal income tax is possible, though we would only expect something around 45% compared with the current highest rate of 40%.”
Nomura is also forecasting GDP growth of 1.9% in 2015 and 2.6% in 2016 in next week’s budget, lower than the October medium term budget policy estimate of 2.5% this year and 2.8% next year.
Montalto, however, forecast that CPI inflation would average 4.4% and 6% over the medium term. This would also lower interest costs – good news for government – but this could in any case be offset by a weaker rand currency since last year’s medium term budget policy statement by Finance Minister Nhlanhla Nene.
Nene is scheduled to deliver his National Budget address on Wednesday February 25.
“VAT (value added tax) hikes are the hardest to call. The original plan was, politically, to link higher rates of VAT to the implementation of the NHI (national health insurance). The limited progress on NHI implementation, however, means this is not possible.”
Nomura believes that there may be “some redefinition” of goods and a new higher rate of luxury goods tax was possible while there could be larger increases in duties and sin taxes “as an alternative to more broad-based VAT increases along with a higher fuel levy to take advantage of lower oil prices in the short run to damp(en) the political impact.”
