Independent Newspapers

Pravin Gordhan, Minister of Finance. Photo: Matthew Jordaan.

A sizeable increase in the fuel levy, ostensible relief from personal income tax and the implementation of the controversial tolling system on Gauteng highways make the South African middle class the biggest losers in this year's budget, trade union Solidarity said today in response to Finance Minister Pravin Gordhan's budget speech.

The trade union however welcomed the announcement that a tax ombudsman would be introduced to assist taxpayers in resolving their tax problems.

Apart from a 20c increase in the fuel levy, motorists will have to pay an extra 8c per litre of fuel for the Road Accident Fund as of April this year. Moreover, the Gauteng tolling system will be implemented in the near future. Added to this, the nominal personal income tax relief that was announced will ultimately not bring significant relief for the middle class.

“The personal income tax relief is purely superficial and can mainly be attributed to income tax notches having been expanded,” said Piet le Roux, senior economic researcher at the Solidarity Research Institute (SRI).

According to Le Roux, the South African middle class would not only be faced with the direct impact of the increase in levies and the implementation of the tolling system, but also, most of all, the indirect effects. “The middle class will have to cut back in other areas when products and services become more expensive due to the increases,” said Le Roux.

While Minister Gordhan held that global economic problems were related to unregulated capitalism, the trade union was concerned that he was losing sight of the crisis of the growing welfare state that was created by the government and is financed by taxpayers.

According to Gordhan, the South African economy has grown on average 3% per annum since 2009 and economic growth is expected to be only 2.7% during 2012. Growth of 3.6% and 4.2% is forecast for 2013 and 2014 respectively.

“South Africa's economic growth will therefore have to average more than 10% per annum in each year from 2015 to 2020 to achieve the same result as the government's growth plan of 7% per annum by 2020.”

The trade union further maintained that the government's increased spending on education would still not resolve the structural problems in the education system. Government spending on education will grow to R207.3 billion this year, an increase of 9.4% from last year, and to R236 billion in 2013/14. - I-Net Bridge