SOUTH Africa faces the largest tax shortfall on record. That, according to According to the National Employers Association of South Africa (NEASA) is the core message of Finance Minister Tito Mboweni’s 2021 budget speech, and it points to a continued contradiction in the management of the country’s finances.
NEASA CEO Gerhard Papenfus said the budget makes a false attempt to assist taxpayers while public spending levels continue. “The fact that, according to Minister Mboweni, ‘we owe a lot of people a lot of money’ shows government is aware of this risk, yet they are continuing on the current path’.”
Companies and individuals will seemingly benefit from the lower tax rates, he said, but the reduction of corporate deductions and increases in consumption taxes will mean that the effect of these ‘lower taxes’ will be muted, with an added risk of future pressure on inflation and interest rates.
“The state has no plan to cease its public and social employment initiatives. The Minister plans to continue directing tax revenue flows into these unsustainable, wasteful schemes – including State-Owned Enterprises (SOEs).”
Papenfus said a comprehensive cost-benefit analysis of SOEs was urgently needed. “We need to honestly assess what SOEs contribute to South Africa’s society and economy.”
He said NEASA had hoped that the 2021 budget would have announced such an initiative. “On the contrary, National Treasury plans on honouring its financial support to the failing SOEs such as Landbank, Eskom, SAA, etc. Alternative solutions, such as privatisation, public-private partnerships or policy changes must be considered and implemented.”
He said the failure of the minister to extend the Section 12J Income Tax initiative offered to venture capital investment companies would negatively impact job growth in the country.
“Government’s approach to its citizenry’s earnings has been summarised by the Minister’s words: ‘Render unto Caesar what belongs to Caesar’. This reflects an attitude that the income generated by hard-working business owners and workers are ‘owned’, at least in part, by government. This is a fundamental failure in the assessment of the current economic pressures we face and the mood of the people.”
Papenfus said the 2021 budget attempted to serve two masters: market forces and ideology. “Government needs to decide if it will bend towards sound fiscal management to set the country on a sustainable growth path or continue to serve its ideological master – which dictates out of control expenditure.” This, he added, creates business risk and uncertainty limiting direct investment into the economy.
“The 2021 budget indicates that business should brace itself for continued uncertainty.”