FILE PHOTO: South African Finance Minister Tito Mboweni.
FILE PHOTO: South African Finance Minister Tito Mboweni.

SA Emergency budget has little fiscal space to manoeuvre

By Amanda Visser Time of article published Jun 21, 2020

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JOHANNESBURG - Finance Minister Tito Mboweni will present a radically revised emergency budget on Wednesday with significant holes on income as the coronavirus pandemic has all but wiped out the fiscal space to manoeuvre. 

Experts are already mulling on the worst case scenario of a 16 percent economic contraction and a R285 billion revenue deficit.

Tax Consulting SA expert Jean du Toit this week said it had become vital to focus policy decisions on reviving the economy. 

Du Toit said Mboweni would need to install investor confidence and the government ability to get the country through the pandemic. He said one of the things he could do would be to relook the public sector wage bill. 

“This appears to be the only sector in the entire economy that has not been affected by the pandemic,” Du Toit said.

 “The demand for above inflation wage increases in the public sector is leaving an extremely bitter taste in the mouths of many who are struggling to make ends meet.”

 Deloitte Africa Tax managing director Delia Ndlovu said tax hikes to make up the projected revenue shortfall would be unpalatable. 

Mazars’s tax partner Bernard Sacks said even the relaxation of the Covid19 lockdown regulations and the reopening of more economic sectors would not see a sudden surge of revenue into sate coffers in the near term. 

“South Africa has to market itself better to attract foreign direct investments. I would really like to see corporate taxes aligned to tax rates around the world,” said Sacks. 

“This means that the corporate tax rate will have to come down from the current 28 percent closer to 20 percent or 21 percent levels. South Africa is certainly unattractive as an investment destination at this stage. “Estimates of the projected recovery period vary, but it is likely to take a minimum of three to five years, and possibly longer, for South Africa to dig ourselves out of the hole.” 

Amanda Visser is a freelance journalist, writing about tax and other financial matters.

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