Cape Town - The ANC, some opposition parties and numerous business entities believe Finance Minister Pravin Gordhan has managed to strike a fine balancing act in his Budget.
However, they have also warned some of the tax increases and allocations may not have been warranted.
In his Budget speech on Wednesday, Gordhan stuck to fiscal consolidation and announced his bid to raise R28 billion through taxes to plug the deficit in the Budget.
ANC secretary-general Gwede Mantashe said Gordhan had tried hard to have a mixed bag in his Budget.
He said the projection of 1.5% growth was an indication the economy would recover. What was important was that more money was allocated to higher education, but he cautioned against the pitfalls of this in the long term.
“If you (allocate) money to higher education and not basic education, in the long term the system is going to collapse,” he said.
Nhlanhla Khubisa of the National Freedom Party said this was a tough Budget. “The minister was trying to ride a heavy current because our economy is ailing,” he said. The NFP hoped Gordhan was going to pump more money into higher education.
Khubisa welcomed the revelation that the deficit would be reduced to 3.1% and come down to 2.6% over the medium term.
But he said the tax increases were areas of concern. “He significantly increased personal income tax for those earning above R1.5million, and those people will say they want value for money,” he said.
Steve Swart of the African Christian Democratic Party said the minister had very little room to move in the Budget. He said Gordhan had managed to stick to fiscal consolidation.
Business Unity SA president Jabu Mabuza said this was a balanced Budget that gave hope for the country. On the tax hikes, he said the government had to find money somewhere to plug the shortfall.
But Mzwanele Manyi of the Progressive Professionals Forum said this was a white monopoly capital Budget that locked black business out. He said Gordhan had failed to increase corporate taxes but went for the people earning above R1.5m.
“In fact, it is going to make workers poorer and poorer,” said Manyi.
Gordhan raised personal income tax across all the brackets in a bid to meet his target.
Personal income tax increases were expected to generate R16.5bn for the fiscus.
Gordhan said tough choices had to be made to meet the higher expenditure demands and commitments.
It was expected that growth would increase from 0.5% last year to 1.5% this year.
Speaking to the media before delivering his Budget, Gordhan said people must not be surprised about tax hikes. He increased personal income tax by 1% in the 2015/16 financial year, and said he had done nothing different this time round.
Gordhan said he was not concerned about reports on his being replaced by Brian Molefe, saying he served at the pleasure of the president. He added it was the president’s prerogative to hire and fire ministers.
Tabling a R1.56 trillion Budget in the Assembly yesterday, Gordhan said R320bn would go to education, R187bn to healthcare, R195bn to municipalities and R198bn to public safety and defence.
However, the government would continue to cut spending in the public purse.
Sticking to his fiscal consolidation policy, Gordhan said they needed to strike a balance between their spending commitments and financial prudence with the public purse.
“To ensure a balanced and sustainable recovery, we indicated in the Medium Term Budget Policy Statement that we would raise an additional R28bn in tax revenues,” he said.
“We also need to reduce spending by a total of R26bn over the next two years,” he said.
He said tax proposals for this year would raise an additional R28bn needed by the state. The proposals include “a new top personal income tax rate of 45% for those with taxable incomes above R1.5m”.
Another tax proposal was an increase in the dividend withholding tax rate from 15% to 20%.
There would also be an increase of 30c a litre in the fuel levy and 9c a litre in the Road Accident Fund levy.
There would be increases in the excise duties for alcohol and tobacco of between 6 and 10%.
Gordhan said consultations on the sugar tax were continuing, with the bill currently in Parliament.
Regarding some banks’ collusion in currency manipulation, he said the Financial Sector Regulation Bill would soon be discussed in Parliament and, once approved, it would set up a market conduct regulator.
He said collusion must be stamped out, and the Treasury would not allow it in any sector of the economy.