Investec chief economist Annabel Bishop says hiking taxes – instead of cutting expenditure and thus the debt trajectory – will negatively impact consumers and, in turn, corporates facing these consumers, such as retailers,  risking higher unemployment. Photo: Steve Buissinne/Pixabay
Investec chief economist Annabel Bishop says hiking taxes – instead of cutting expenditure and thus the debt trajectory – will negatively impact consumers and, in turn, corporates facing these consumers, such as retailers, risking higher unemployment. Photo: Steve Buissinne/Pixabay

Budget 2020: Tax hikes will negatively impact consumers, rather cut expenditure

By Sizwe Dlamini Time of article published Feb 26, 2020

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CAPE TOWN – As Finance Minister Tito Mboweni delivers the 2020 National Budget in Parliament today analysts and captains of industry urge him to curtail consumption expenditure, which could dramatically worsen the country’s already weak economic outlook, further lowering business and consumer confidence and so negatively impacting investment.

Experts said the Budget would be expected to show the government’s desire to shift some expenditure away from consumption to infrastructure.

However, with the very heavy current expenditure of chiefly civil servants remuneration, social welfare support and some other items, including rapidly growing interest payments on debt, a little extra is left given also the imperative to cut borrowing projections, according to Investec chief economist Annabel Bishop.

“The good news in the budget could come from actual cuts to projected expenditure, as opposed to only cutting growth in planned expenditure, with restraint on the escalation of civil servant pay key in this regard. 

“Expenditure projections in the 2019 Mid-term Budget Policy Statement (MTBPS) urgently need to be cut to allow South Africa’s government finances to become sustainable, said Bishop.

She noted that hiking taxes – instead of cutting expenditure and thus the debt trajectory – would negatively impact consumers and, in turn, corporates facing these consumers, such as retailers,  risking higher unemployment.

“The net effect would be for a further dwindling in real disposable (after-tax) income growth, which has been a key driver for the slowdown in economic growth in South Africa,” said Bishop. 

Market watchers also urged him to offer concrete measures to boost exports and support small and medium enterprises while cracking down on corruption in state departments and entities.

South Africa needs more entrepreneurs than ever before, Mozambik restaurant-chain group chief executive Manny Nichas said. “With sustained weakness in the economy, continued pressure on consumers and a growing number of job cuts, reliance on the usual notion of traditional employment amounted to nothing.” 

The lengthy list of advice and wishes, prior to Mboweni’s budget speech, includes a plea from the SA Canegrowers Association (SACG) to urgently halt the sugar tax, which the association said was crippling the sugar industry and causing thousands of job losses.

BUSINESS REPORT

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