All-round praise for balancing manoeuvre

The rich will have to dig deeper into their pockets. Picture: Bloomberg

The rich will have to dig deeper into their pockets. Picture: Bloomberg

Published Feb 24, 2017

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Cape Town - Despite a tough economic climate, Finance Minister Pravin Gordhan delivered a reasonable Budget, apart from placing a heavier tax burden on wealthy South Africans, experts said.

Wessel Lemmer, a senior agricultural economist at Absa, said excise duty on alcohol and tobacco would increase between 6 percent and 10 percent, impacting negatively on tobacco producers and jobs in the industry.

Lesiba Mothata, the chief economist at Investment Solutions, said the focus was to raise R28 billion by increasing taxes.

“This has resulted in the tax burden increasing from 26 percent to 26.7 percent of gross domestic product, which is still in the middle range relative to similar countries. The government has adhered to its spending ceiling since the ceiling was established in 2012, which has earned it credibility with investors and ratings agencies.”

The Beverage Association of SA (BevSA) welcomed the Budget announcement that there will be further consultations on the tax on sugar-sweetened beverages before it is implemented. Mapule Ncanywa, executive director of BevSA, said: "We believe that, through collaboration with all the relevant role-players, we can find ways to create a win-win for all South Africans, contribute positively to health outcomes and avoid job losses.”

Rob Cooper, a tax expert and director of legislation at Sage, said: “I am not surprised by the rise in the top marginal income tax rate to 45%, given the R28bn revenue gap Minister Gordhan needed to plug. As a form of wealth tax, it’s more politically acceptable than a VAT increase. It also has a redistributive effect that could help reduce inequality.

"That said, given that high-income earners in South Africa already carry a heavy tax burden, the government should perhaps be cautious about adding too much more to it in the next Budget.

Lew Geffen, the chairman of Lew Geffen Sotheby’s International Realty, said: “Anyone still viewing the country’s medium-term economic outlook through rose-tinted spectacles has had them rudely ripped off.”

Geffen said there were undoubtedly harsh times ahead. “We’re immensely grateful there was no increase in VAT, but the new super tax bracket of 45% for individuals who earn more than R1.5 million isn’t good news for the upper end of the residential property sector.

"And while we applaud the raising of the property transfer fee threshold

to R900 000 from R750 000, in reality it

will only provide relief for low to lower-

middle-income households.”

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Samuel Seeff, chairman of the Seeff property group, said: “We always knew that this was a Budget that was set to bring a higher tax burden, especially for the wealthy, and tougher times for consumers on the whole, as the Treasury needed to find an extra R28bn in a shrinking economy.”

Seeff said that under the circumstances, the group saw the Budget as reasonable, apart from the concerns around the growing tax burden for the wealthy.

He said the minister’s more positive economic outlook was welcome news. “Globally, we have seen that burdening wealthy citizens with higher tax does not create more government income, but tends to have the opposite effect.”

Andrew Golding, the chief executive of the Pam Golding Property group, said the raising of the threshold for transfer duty on properties sold for less than R900000, up from R750 000, was positive news as it provided some relief for first-time home buyers.

“This aspirant sector of the market is a key driver of South Africa’s residential property market, solidly underpinning activity, particularly in metropolitan hubs which increasingly draw a younger generation of home-buyers wanting accommodation close to the workplace," Golding added.

CAPE ARGUS

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