Cape Town - Finance Minister Tito Mboweni has put R2billion back into the pockets of consumers after announcing a number of tax relief measures in his Budget speech on Wednesday.
This came after he announced a public sector wage cut of R160billion over the next three years.
Mboweni told journalists in a pre-Budget briefing that he hoped they would reach an agreement with the unions on the wage cut.
But the unions have shot back and warned that he would not succeed in implementing the cut.
Cosatu spokesperson Sizwe Pamla said they would fight the decision.
“This was not a Budget. This was a statement crafted to convince investors and lenders,” he said.
“You can’t provoke the public service. The public service is highly unionised. It’s 80% unionised. If Tito Mboweni is making these statements jokingly, it is not a funny joke. If he is serious, it’s a declaration of war,” said Pamla.
Mboweni denied the Budget was an austerity one. He said if that was the case they would have closed down schools and retrenched more workers.
Announcing the tax relief, Mboweni said rebates, in all brackets, would come into effect for the new financial year.
Mboweni added the tax relief would help ease pressure on many workers.
“Indeed, there is some real personal income tax relief. This Budget means that a teacher who earns on average R460000 a year will see their taxes reduced by nearly R3400 a year. Hard-working taxpayers, who earn on average R265000 a year, will see their income tax reduced by over R1500 a year,” said Mboweni.
He said there would be no increases in VAT. Mboweni defied some commentators, who expected some tax increases, saying it would not be possible to raise taxes and hit the consumers in the pocket.
He said even if the tax increases were applied, this would not have been able to plug a hole in the fiscus.
In the budget review, it was stated that the government had struggled to raise taxes in the recent past.
“Growth in wages, consumption and business profitability has stagnated in recent years, lowering tax receipts for personal income tax, VAT and corporate income tax, which make up more than 80% of total tax revenue,” stated the review.
“In this context, substantial tax increases are unlikely to be effective,” said the review.
It said the National Treasury proposed “providing personal income tax relief through an above-inflation increase in tax brackets and rebates”.
However, sin taxes were not spared in the Budget.
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The fuel levy would increase by 25cents a litre “consisting of a 16c a litre increase in the general fuel levy and a 9c a litre increase in the RAF (Road Accident Fund) levy.”
There was also an increase for alcohol and tobacco of between 4.4% and 7.5%.
And Mboweni announced that e-cigarettes would be taxed from next year.
On social grants, Mboweni said they would increase the old-age grant and the disability and care dependency grants by R80 to R1860.
The war veterans grant would be increased by R80 to R1880, while the foster care grant will go up by R40 to R1040. The child support grant will be boosted by R20 to R445.
Law enforcement agencies, including the National Prosecuting Authority, the Hawks and the Special Investigating Unit, will receive R2.4bn to fight crime and corruption.
The opposition parties said they welcomed the tax breaks by Mboweni, but warned against the rising debt.
DA spokesperson on finance Geordin Hill-Lewis said he doubted that Mboweni would be able to cut the wage bill by R160bn in three years, because the unions have not agreed with him.
EFF leader Julius Malema said they welcomed the establishment of the state bank and the Sovereign Wealth Fund.
He said the tax rebates would bring relief to the workers.
ACDP MP Steve Swart said they were concerned about the deterioration of the public finances.
He said the government needed to rein in the debt.
“The ACDP welcomes Mboweni’s concerns about the spiralling public sector wage bill and the proposed saving of R160bn over the medium term. High-level discussions and a political agreement between the government and labour will be necessary to achieve this saving through a combination of modifications to cost-of-living adjustments, pay progression and other benefits.
“The focus should also be on reducing the bloated managerial layer, rather than on teachers, police officials and nurses, who are key to service delivery,” said Swart.