Finance Minister Pravin Gordhan. (Reuters)
ATTENDING the PwC Budget Predictions media briefing leading up the National Budget speech, one had a sense that the 2016 address is one of the most eagerly-anticipated budget speeches in recent times.
Businesses and individuals alike are anxiously predicting measures the National Treasury is likely to take to raise the estimated R20bn shortfall in tax revenues for the 2016 National Budget. It’s no secret that there’s been a fairly rapid slowdown in revenue collections since the mini budget last year.
PwC made a number of projections pertaining to the 2016 National Budget speech on Wednesday. Most of these predictions have been informed by the current bleak economic outlook:
• A projected shortfall against the mini budget forecast of between R12bn and R22bn.
• A shortfall of as much as R20bn in tax revenue estimates for 2016/17. This has largely been affected by lower real gross domestic product growth for the 2015/16 period, which then translates into lower than previously estimated tax revenues.
• No change in the CIT rate of 28%.
• No introduction of the carbon tax in 2016.
• Repeal of the withholding tax on service fees.
• A continuation of Basic Erosion of Profit Sharing (BEPS) initiatives.
• Increasing the personal income tax rate by 1% to raise an additional R10bn.
• No increase in VAT at this stage.
• Possible increase in securities transfers tax from 0.25% to 0.5% to raise up to R5bn in additional taxes.
• Above-inflation increases in general fuel levies to raise up to R6bn.
Time for tough sacrifices
The reality of the matter is that National Treasury has little option but to hike taxes in order to raise the projected shortfall in tax revenue. It may be apt to infer that Pravin Gordhan is caught between a rock and a hard place. On numerous occasions we find ourselves eagerly anticipating ‘good’ news emanating from the National Budget speech which includes, among others, the lowering of personal income tax rates, increases in social security and relief in the form of various other tax breaks.
More often than not, we wind up being satisfied with certain aspects of the National Budget and less pleased with others. This time around we should brace ourselves to be more disappointed than we have in the past several years - the time for austerity has come and can no longer be deferred.
We should all be prepared to make tough and less than favourable sacrifices.
* Dumile Sibindana is a columnist for Forbes Africa magazine and editor of Banker SA. Opinions expressed are his own.