BUSINESS NEWS - Some budget experts give their budget expectations:
Nazmeera Moola – co-head of fixed income, Investec Asset Management “Around R45 billion of tax hikes and spending cuts are needed in the fiscal year that starts 1 April 2018 to stabilise the South African fiscal outlook.
"With free tertiary education weighing on the fiscus, it will be difficult to achieve the R31 billion in expenditure cuts that were planned. At most R15 billion is likely.
“Therefore, tax hikes of around R30 billion are needed. Last year, personal income taxes bore the brunt of the adjustment, with very little offset provided for inflation in the tax brackets.
"As a result, households earning from R350 000 per annum saw a decline in real wages due to limited tax relief for inflation.
"While that manoeuvre can be repeated this year, it is woefully inefficient – and did not raise nearly the amount of expected revenue in 2017.
"A far better option is to hike Value Added Tax (VAT) by at least 1%.”
Tsitsi Hatendi-Matika – market analyst, Absa Wealth and Investment Management
“VAT has been a lever that the National Treasury refused to pull for years, likely because of its political consequences, but a 2% increase in VAT would create the much required cash.
"An increase in VAT is expected to signal government’s commitment to addressing the issue of fiscal slippage.
“An alternative to increasing VAT in a linear manner would be to remove the zero rating for VAT on fuel sales. We anticipate that this could raise up to R18 billion.
"Given that this would increase the retail price of fuel, if not offset by a cut in the General Fuel Levy, this means that National Treasury would need to get creative around this for it to be palatable for consumers.”
Tracy Brophy – chairperson of the South African Institute of Chartered Accountants Tax Committee
“Even though the personal income tax taxpayer base is small (it is estimated that around 80% of personal income tax is being paid by 25% of the personal income tax taxpayers), it would appear that this base remains a popular target for tax increases despite it arguably having reached the point of diminishing returns.
"A way of targeting this base without adjusting the personal income rate any further is by increasing the existing so-called ‘wealth taxes’ – estate duty (20%), donations tax (20%) and capital gains tax (CGT) (40% inclusion rate resulting in an effective rate of 18% for the top bracket which are taxed at 45%).
“Even though the Davis Tax Committee has only recommended an increase in estate duty to 25% and an increase in the CGT inclusion rate for corporates (from 80% to 100%), there is nothing preventing an increase to 25% for both estate duty and donations tax and an increase in the inclusion rate for CGT to either 50% or 60% (taking the effective CGT top rate to 22.5% or 27%).”
