No tax-relief goodies

Independent Newspapers

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

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Finance Minister Pravin Gordhan will have no tax-relief goodies in his bag for South Africans when he delivers his fourth budget speech this week, economists have predicted.

And with South Africa’s growth still below five percent a year – and the country still reeling from recent downgrades by rating agencies – economists say that Gordhan will come out fighting to allay investors’ fears.

“What we are likely to see is a very activist budget,” said Goolam Ballim, group chief economist at Standard Bank. “In other words a budget that will prioritise faster economic growth and also arrest the perception of South Africa’s flailing economic status.

“The minister will be very mindful that credit rating agencies had a bleak view of South Africa in recent months, in judging South Africa’s growth conditions to be sub-par with negative implications for its sovereign standing,” he said.

On a positive note for job creation, Ballim said that Gordhan was expected to outline a clear path for a youth wage employment scheme that aims to get thousands of unemployed youth into the workforce.

“It is plausible that he will even suggest a mechanism for how it will work and how it will be funded,” Ballim said. “This will signal the increasing influence the National Development Plan is beginning to have on public policy and (which) is filtering into public finances.”

Unlike the early 2000s when then finance minister, Trevor Manuel, introduced several tax breaks for middle and lower income earners, Ballim predicts no such plans.

“Tax relief has not been a meaningful feature of the national budget in recent years, and given that the budget deficit is around five percent of GDP and public debt in relation to GDP has about doubled in the past five years, it suggests that tax relief is exceedingly unlikely,” Ballim said.

His sentiments were echoed by Tendani Mantshimuli, a consumer economist at Liberty Life who said that Gordhan had limited room to move in terms of expenditure allocation and possible tax relief.

She said that with tensions still simmering in the mining and agricultural sectors and consumers coming under increasing pressure from higher prices on necessities like petrol and electricity, it was unlikely that South Africa’s expected 3.6 percent growth for 2013 would make a significant impact.

“It’s difficult to see a meaningful allocation towards personal income tax relief with the constraint of limited increase in tax revenue,” Mantshimuli said. “Given the other expenditures that government has to undertake, the only possibility is lowering the tax burden of lower and middle income groups with the higher income groups just being compensated for fiscal drag.”

Independent consumer activist Ina Wilken said consumers had the right to insight on how their money was being spent, and also to be listened to.

“What we read, hear and see do not correlate with what is demanded once again from the man on the street, be it individually or (a) small company or big companies,” she said.

Wilken’s budget wish list:

- Recalculating the petrol price. “The consumers of South Africa have for far too long paid hidden costs in the petrol price,” she said, describing the tax in the petrol price as “unacceptable”.

- “Environment tax (is also) unacceptably high – especially plastic bags,” she said. “Consumers should not pay for this commodity.”

- Prioritising road infrastructure projects, to help with job creation.

- Channelling “urgent” funding for the agriculture sector. “Our food security is in danger. Our farmers must be financially assisted.”

- “Sin taxes” – taxes on goods such as alcohol and cigarettes – can be increased.